Welcome. Welcome to the 2021 Deutsche Telekom Capital Markets Day. Here we go again. We gave you 3 years to recover from our last Capital Markets Day, but now we could not spare you any longer. There's just too much goodness we must share with you.
Welcome to you all. Welcome to our first fully virtual Capital Markets Day. Sadly, we are not all together in Bonn. To be sure, the Deutsche Telekom management team is here. They're actually over there.
Can we have a picture of them? Can we show them, please? Can you wave, guys? Okay. Here they are.
You will hear from all of them. Thank you. There will be no barbecue this time, no wine, no heavy digging machinery, sorry. How can we make up for it? Well, We got 8 powerful presentations, cool slides, your favorite color, magenta and black background, topped up with slick videos and a replay function.
And not to forget many compelling messages. You know if we do something, we do it properly. So what's the order of play? We start with our CEO. He will present you our group strategy and capital allocation.
Our guidance is for the usual 4 years, but our thinking goes further. Next will be Srini and Dominik, who will talk about leading in networks, in customer experience, in digitalization, about acceleration. Finally for today, Mike and team will outline their plans for T Mobile US. This will bring us to the end of the Thursday. Tomorrow, We will have presentations from Claudia Niemath on IT and Technology from Adele Alsale on T Systems from Thorsten Langhaim on Group Development And finally, from Christian Ilek, who will put it all together in terms of numbers.
Here are a couple of technical ports. Please take a look at our usual disclaimer That is contained in the presentation. If you want to join the Q and A session and place a question with video, please dial in via Zoom or WebEx. We love to see your face. Please click on the raise your hand button and our operator will guide you to a technical Okay.
And now I'm excited to present our first speaker, our CEO, our unstoppable leader, Tim Oetkers.
Welcome, everybody. Where are you? And hope you're doing well during these difficult times. It's a little bit like results day at school today, but as well about the question about what kind of job do we have in the future. And This is what I'm going to talk about, and it's a pleasure that you are spending the time with us today.
I have to admit, it's easy one because it's my 4th Capital Markets Day. And looking hindsight, I'm very happy about, let's say, how we performed over the last 3 years and looking at the results we have achieved. And this is due to an outstanding team in this industry, I think to an outstanding strategy of very Focused on approach of delivering of what we have promised and even sticking out to the others in this industry and outperforming them as well from a capital market perspective. And that leads me already to my first slide, which is the full Monty of all the messages in a nutshell. And for the ones who don't have time or want to do their sports in the or who want to, let's say, hang out with other companies, here we go, just digest this slide.
With this, you got it all. This is, by the way, how we are looking into the future, and that is built on 2 pillars. The one is the organic pillar. It's the way how we operate in our telecommunication industries. But the second pillar is at least as the same importance, Which is the way how we think, how we allocate money and the way how we are organizing the portfolio, which we are running.
And this all is resulting in the commitments which we are giving for the future. Now this is what we're doing already for quite some times And this is our so called flying wheel. And the flying wheel is very simple. On the one side, we always invest More than our competition. This is the idea a little bit better, a little bit higher From a quality perspective, which on the other side gives us the opportunity to gain more customers.
Gaining more customers on the infrastructure will help us to create higher efficiency, which means the productivity of our network It's higher than the ones from our competition. And the high efficiency plus more customers is, as a consequence, resulting in more profitability in higher financials and the higher financials made us able to go into further investments, Which is helping us to outperform the competition. To give you just a number, since I'm CEO, I've invested €85,000,000,000 Without spectrum into this line, Will. This is, by the way, €37,000,000,000 more than what Vodafone invested, dollars 37,000,000 more than what Orange invested and dollars 27,000,000,000 more than what Telefonica has invested. And this is by the way, at the end of the day, this is the consequence why we are doing better than the others.
Going forward, we are accelerating. And if you would ask me today, what is the headline of our Capital Markets Factory, it's Acceleration. It's acceleration. We have a sound foundation and now we accelerate on the KPIs. There is a revenue CAGR of 1% to 2%.
Looks like the other one, which we had previous one, but behind that is a revenue growth, a service revenue growth our 3% to 4% commitment, which we foresee. Our profitability is going to increase by 3% to 5%. So this is more than what we were able to deliver on last time, so we are very confident that we can accelerate on the profitability of that company. The last time we were talking about €8,000,000,000 free cash flow for this group as our ambition level. Now we are handing out a commitment of €18,000,000,000 as the minimum which we foresee for our 2024 ambitions.
And on top of that, we even want to be leading, more leading on the Capital returns, which we are delivering on our network. So you know that the Rosy is one of our core KPIs and always worth. It was Deutsche Telekom, by the way, bringing it into this telecommunication industries. And now We are achieving and we are aiming for 6.5% return on capital employed as a minimum for the foreseeable future at Deutsche Telekom's our infrastructure. This is the organic growth and the flying wheel which we foresee.
On top of that, The capital allocation is for us very important. It always was. If we cannot live with Only the organic growth, we have to find ways to generate value outside or within the portfolio. The first thing what we are doing is We invest more to be leading in 5 gs across the globe, the transatlantic position which we hold, And we're going to be the number 1 in fiber investments in the European footprint. This is something where Dominik and Srini will talk about.
On top of that, network is nice, but monetization is the must if you invest this amount of 1,000,000,000 into the infrastructure. The second topic is focus on structurally healthy markets. For us, a very important thing, If we are do not find a market which is structurally in order, if we find a market which is over regulated, over competitive, We are even willing to leave that market. We did that already in the past. Think about Albania, think about Romania and other markets, but this is a clear Commitment that we do not find an impossible game.
So therefore, we are trying to focus on fixing a structural issue and if we can't, we are even willing to exit markets. On top of that, Maybe the biggest news for today, we are clearly committing to get the majority in the U. S. Within the time frame which we have laid out. Our voting proxies will expires in 2024, but until then, We will make sure that we have a clear ownership of 50% and above in the U.
S. Environment. The U. S. It's part of our story.
It's part of our footprint. We are the transatlantic leader in the telco markets. On top of that, we commit to deleverage the company into the investment grade commitments, Which we have always laid out in the last Capital Markets, this is due to the merger and the integration costs That we are out of it in the U. S. Right now, but we will come back into this corridor soon and that is another commitment which we are giving.
And on top of that, we have waited and we have looked. We have improved the profitability of our Dutch business. We have Restructured the market. We found partners with Tailored 2. We have integrated the Simple business.
Now it's the time After this super value accretion to think about what is the best way to monetize our asset in the Netherlands. That doesn't mean we have to do that to the other stuff. It's an add on which we see to optimize our overall portfolio, But we will move into the market with this asset right now, checking out what is the best way on the Dutch side. And we have improved our profitability on the tower side as well. We have taken the European towers out of the businesses as well, And we will work on monetizing towers as well in the upcoming future and we will talk about that later on, how we're going to do that, What kind of scenarios we foresee and why it's now the right timing?
It's a kingmaker asset which we have on hand. And I think we think With the current multiples, the current valuations we see in the markets, now it's the right time to understand what we can do with this asset in the best manner. These two pillars result into outstanding profitability. And to be very clear, Our focus is not anymore to compare ourselves with Vodafone, Orange or Telefonica. They are anyhow focusing on free cash flow and other carriers.
Our industry, fast moving consumer goods. This is areas like Henkel and others who are delivering Constant earning per share increases in their business, and that's the peer group, which we want to where we want to benchmark ourselves. And therefore, we have changed our logic from a free cash flow logic, a full consolidated free cash flow number, which doesn't give you an indication About what we are able to contribute to the community, but we are now focusing on the earnings per share As the main KPI and we will increase our earnings per share from €1.10 to above €1.75 75 in the upcoming 3 years. This is then the basis for the dividend accretion You will get from Deutsche Telekom. And the basis of that one is that we are willing to contribute between 40% 60% of the adjusted earnings per shares into your direction.
This is by the way if you benchmark yourself with other industries, I think this is a very fair value contribution. And on top of that, it gives us a leeway to further increase the dividends of Deutsche Telekom in the upcoming years. That said, we know that you need a floor. You need a kind of interest rate for the huge investments you have taken with us on the journey and therefore, We guarantee a floor of 0.60 dollars as a MEPI. This is the story lining of our Capital Markets Day today.
Now quickly going into a review, and I know you know our numbers, but we are proud about what we have achieved. And therefore, this is not an accident. I think it was the consequence of our very focused strategy. We didn't change our strategy over the last years. We amended it here and there, but in principle, We kept pace on one direction and that made us strong.
We didn't deviate. We didn't expand it outside of our footprint. We didn't make adventures into the over the top business models, nor we did it into the content world. We really focused on our network technology as the centerpiece of what we had. We focused on the convergence, which was for us really a big gain of revenue in the past, and we were very much focusing on the IP migration and the digitization of our service so far.
This base into outstanding service capabilities plus a business class, which is where we enable our customers to digitize their service around the connectivity piece. Reducing the cost, we overachieved our cost, a commitment from the last Capital Markets Day, and we simplifies, digitized and accelerated our services within the company. Now these are in a nutshell the numbers. We grow on both sides of the Atlantic, 3% on a CAGR in Europe, 9% on an organic CAGR in the U. S, so All the business are in growth mode.
We invested a lot in sustainable growth momentum and you see that Rene Obermann, he know he was investing in Germany €3,300,000,000 to €3,600,000,000 We changed that immediately And we have invested around €5,500,000,000 in the vicinity of in the area of Germany alone, 7.5 on the European Space. And we have constantly grown this to gain an advantage towards our competition. And on top of that, we had the U. S. Investments into a leading mobile infrastructure.
These 2 years are reflecting the merger integration. Perspectively, this will shrink, but the integration cost is worth doing. Our free cash flow at the same time were even able to grow from €5,500,000,000 to €6,300,000,000 Including the merger costs here are €8,000,000,000 if you look forward to our guidance, which we have laid out. So A great story going forward, but now we go from €8,000,000,000 to €18,000,000,000 With this, we were able to perform better on infrastructure than our competition. And this is the outcome of it.
We gain market share in every region where we are operating. We've grown in Germany by 2.4% on mobile postpaid customers, 1.8% in the European AOVD, 29% in the U. S. And in the Netherlands by 25%. So wherever we were able to invest, we were able to gain new customer momentum with which was the basis for the growth we were able to show.
The U. S. Story is well aware to everybody here in this audience. We have more than 100,000,000 customers on branded services. We have a market cap of 165,000,000,000.
By the way, we increased our value 7 times over the last 4 years, €68,400,000,000 of revenues And an outstanding position, especially of the mid band spectrum. And the value creation It's, I think, the biggest value creation ever seen in a merger in the telecommunication history at Deutsche Telekom. Going forward, I think there is more to understand what is driving us. And the first thing is cleaning the garage. And I'd like to start and you maybe have already forgotten that.
We had a €9,600,000,000 €6,000,000,000 arbitration risk coming from the toll collect, something we inherited from the history. We were able to settle that for a cost €550,000,000 done. We divested Telecom Albania and we even divested our fixed line business in Romania, markets where we believe structurally, we had no way to win prospectively. We have created new growth areas with the fixed mobile integration Of our Liberty business in Austria, a €1,800,000,000 cash acquisition, but We are ahead of the synergies. We are ahead of our market shares in this region.
So I can call This merger already a success today. Turn around in the Netherlands, an outstanding story We are faced by integrating our partner Tele2 with a share deal into our business, Consolidating Simple over the last years, creating a new and carrier momentum in the market with a market share gain never seen before. This business has more than doubled its position since the difficult times when we started. And we carefully separated our tower business, not only in Germany, But as well in the European operations, and we built a company which has 55,000 towers And it's by definition the 2nd biggest tower company in Europe. We are the kingmaker Because everybody is putting his chess figures on the game, but nobody has so far consolidated in these industries.
With us, Somebody can really create the winner. And on top of that, we have managed the Dutch Portfolio, together with Cellnex, which gives us a leeway to create money outside of the balance sheet for Structure Investments for Europe. We said no and maybe Saying no is more important to all the good stories, which I just discussed, because to stay focused What's very important? And there were a lot of, let's say, kind of things which sounded attractive. Verizon went into their adventure with Yahoo!
And the like. AT and T went into the adventure with media with Warner Media and the like. Telefonica went into a €3,000,000,000 investment for football rights for 3 years and so on and so on. We said no to all of this outside business Opportunities where most of the people lost billions. We stayed focused on our Connectivity Plus strategy, and I think this is what we call put your money where your mouth is than rather trying to build empires.
Now this is the consequence of all of this. Revenue growth from €75,000,000,000 to more than €109,000,000,000 of today. This is a CAGR organically of 3%, but it's overall a growth of 10%. We grew our EBITDA by 14%, organically by 6%, and we grew our cash flow by organically 14%, 10% overall. These are all targets these are all achievements, which were higher then our originally committed targets, which we laid out at our last Capital Markets Day.
And thank you for that, guys. You gave us a higher multiple. You contributed more trust into us over the past. We highly appreciate that, and we know That our multiples are a little bit higher than to the others. We have created 40.5 percent more value, while Telefonica, Orange and Vodafone, They all lost market cap during this season.
So this is, I think, for me, The biggest outcome and if you look to the numbers, I was just reading them up before it came down here. Since I am a CEO, We have created 84 percent accretion, which is a total value of €46,000,000,000 while at the same time, Vodafone lost 13.4% and Telefonica lost 50.6%. So I think when it comes to results day, I feel pretty okay. But the problem with the results day is nothing is guaranteed. And the more results you have, the bigger the risk is you fail.
So therefore, I think we have to move on with the changes we are doing. And this is already part of the journey which we have started. Our teams are working agile now. We are much more digital than we ever were. 30% of our workforce of today is already working in an agile environment, 300 scrum masters and product owners running these projects.
We became very diverse and international over the time. I'm not talking about our Board, which has 40% women ratio. Our my Board here, around my team, which is executive, where we have Not only 30% woman ratio, but even we have 4 nationalities. We are quite diverse In the way how we organize ourselves, more than 25% of all the new hires in Germany Our international people. So this company really became an international footprint, Trying to create best breed of the world.
Remember last time I said, we want to be like FC Bayern Munich. We want to have, let's say, a very solid German foundation about our German engineering piece, but we want to Allocate a lot of international people, the best players of the world into our team to play Champions League. Catching the youngsters. We have started new advertising campaigns with Billie Eilish and others because The custom of the day might not be the custom of the future and there will be a next generation coming who should appreciate our brand the same way as the others are doing. We have created a big footprint around sustainability and about ethical standards, And we have a very strong stand in the political arena, especially in Europe, where we are hurt with the needs.
And I think this is very important and we go into that one even more. And the last one It's for me the most important piece. It's something you never see. You always see the CEO, you see Christian, you see some of the Board members and you Think you understand the company. Sorry, guys, you don't.
You only understand the company if you're going down to earth, Going down into the operations of these people, if you're going down to the service people who are going out to the customers on a single day, if you go into our shops, If you go down into the organizational piece, these are the drivers of the change and the transformation of our company. We were able to change the thinking, the way how they act, the way how they constantly Perform into one direction significantly over the last years. 85% of our employees say We like to work for Deutsche Telekom. More than 80% of the people say we recommend Deutsche Telekom as an employer. More than 80% think our brand is something unique And we have just a lot of grassroot initiatives in this company, 200 brand ambassadors.
They're just sitting there And always communicating about Magenta, talking about tea and talking about our products. Think about if 200,000 people Constantly are proud about what they're doing. Think about the momentum they can create with other customers. This gives confidence to customers If the employers believe in what we are doing, we have green pioneers all over the companies who are caring about sustainability on the shop floor. And we have a lot of agile activities.
Think about design thinking. I never As for Design Thinking, that company, but suddenly it grew like mushrooms everywhere, Design Thinking teams on creating a new way for developing products and services. So this is, I think, even stronger than all, let's say, the strategic elements, which I just described. Now this is the outcome. These were the commitments.
This is, let's say, what we achieved. Please have a look to this one. And I can tell you they're almost all green. I put 2 on yellow because the merger costs And the dividend commitment which we have given were a little bit higher, but we said if we are digesting this supermerger with Sprint, We couldn't plan that. It was unforeseeable whether we deliver on it.
We had to cut it to the $0.60 by the way, which is more than the €0.50 we said originally, but this is at least the only thing where I think we have not delivered our over delivered offer the promises of our last Capital Markets Day. This brings me to a totally different topic. If you are grabbing sand and trying to keep it in your hand, It will disappear. You cannot hold it. It will get less and less and less.
So you constantly have to grab and Grab Newsstand. This industry is changing dramatically. As an industry, telcos are at the center of the tsunami. The industry is expecting that our industry is accelerating as well. And on top of that, this landscape is changing dramatically when it comes to the players which are new in the field of telecommunication service.
Just think about the over the top players. Just think about the service providers who are changing their business models. And I want to spend a little bit more time not talking about the next Horizon 1 issue. I just want to talk with you a little bit what is our vision for 2,030? How does Deutsche Telekom Might look like in 2,030.
How can Deutsche Telekon be successful in 2,030 Knowing that this is still a long way to go, but we have to prepare the future now If you don't want to miss it on a long term perspective. And I think we are more and more talking about the next quarter, But we should always keep in mind why are we doing things. And therefore, let me deep dive a little bit into a long term perspective.
Welcome to 2,030. Everything is connected, humans, Things, the entire world. Our ways of living will change. People know that their behavior in the next 15 years And more shop on their beliefs and value, and saving the planet might become the top purchase criteria. Sharing will be the new owning, as access The things like cars or houses will matter more than ownership, and companies will change their value chains to reflect this.
Technology will be omnipresent. The digital and real world will begin to merge into 1. Physical objects and processes In a manufacturing plant will be replicated into a digital twin. Going to the office might mean putting on your VR glasses. Spatial computing and smart surroundings begin to supplant smartphones.
Driving a car by yourself could begin to look strange. And all that Has one common denominator. It's enabled by us, by connectivity. The new oxygen in 2,030. Connectivity is now a human right and determines our communication behavior.
You are going to be the ones which breach the digital divide.
Technological
There will be a digital identity for each of us. We need it for being authorized. We need it even for Buying things on the network.
In 2,030, products are even more customized to the individual. The technology around us knows our preferences. Our digital identity unfolds new possibilities, but also offers more room for surveillance. A variety of different networks will
The first question comes from the line of David. Hi, good morning, everyone. Hi, good morning, everyone. I'm Building a high quality fiber and 5 gs network.
For global and universal connectivity at all times, all networks
It's time to build, to stay leading. I think we have a good attitude. We have a lot of self confidence in what We're doing and from this, we have good starting point to do the things in the right way, but it's time to build something new. It's time that we are So talking about 2,030, one is for sure clear. Connectivity is a human right.
Connectivity is expected everywhere and therefore Deutsche Telekom's business is at the centerpiece of this expectation. Now I cannot give you all, let's say, elements of what we foresee as trends in this environment. And therefore, I'm trying to reduce it to 5 major trends, which we have to anticipate if we think about a successful Telecom Business in the Future. And I'd like to separate into the B2C, the B2B area, into the ESG and the purpose issue around the network and about the services, which we have to deliver in this regard. Now the first paradigm is we will go from a pure connectivity provider, even in a siloed way into somebody who is enabling different customer use cases with different connectivity pieces.
On the B2B side, we will go from dedicated services like MPLS, like voice into more software driven enterprise solutions with embedded connectivity. In the ESG world, We will face customers choosing, let's say, products and brands with their feet from a kind of ESG as a hygiene factor to companies who are able to differentiate with ESG criteria. We will deliver and we will See network of networks. So there will be the monolithic incumbent who is providing all kind of connectivities today. He will in the future be an orchestrator of infrastructures even from third parties.
And what we see, we would see a softwareization of the network in the way how they are organized. They will be disaggregated. They will be cloud based, cloud native and microservices will enable different use cases in this environment and the prerequisites have to be organized. It will not be any kind of vertical silo as a telco operator is working today. Let's go a little bit deeper into this storyline.
Connectivity everywhere is something which is obvious to us, especially after this corona crisis. And we will have a mobile world and we will have A kind of stationary world in our offices and in our living environments. There will be all kind of devices Which has to get connected to the infrastructure. And there will be at home all the kind of connectivities, a lot of data flow In the home environment, which has to get organized in the kind of service way, data streams, customer ID, This all has to be organized in a way that is working, functioning and is affordable for the clients. A mesh router for instance is already a centerpiece for your home living where all the different devices might get easily get connected.
On top of that, there will be new forms of connectivity. We call that embedded connectivity. The principle is always the same, always best connected. So wherever you are independent, whether Deutsche Telekom is there with their own infrastructure, Yes or no, we have to make sure that customers are always best connected. We buy it, we use it, We integrated and it should be always super secure.
If it's not secure, we get the blame for that one. And it has to be modular Because customers don't want to buy the super, super, super product, they want to buy a tailored product, which is fitting to the needs Of the specific use case they are organizing, take the consumer IoT world. You do not want to buy A global connectivity for voice if you just need an IoT device. Think about mobile gaming, you need low latencies. In specific, You do not need the full fledged service or take the 8 ks conference systems, which we are all witnessing during this time, more or less 4 ks today, But 8 ks Conferences will have a huge data demand in a stationary use case.
And we have to tailor The infrastructure in the way that we can monetize this different service in a kind of context aware way, But as well in a kind of dynamic way because customers don't want to have the service forever For a 24 months contract, they want to have it when they're using the infrastructure. This always best connectivity means tailored connectivity And that is something which we foresee in the future, services everywhere and embedded connectivity, Context Aware and Dynamic. On the B2B front, we will go away from the classical siloed approach. We deliver a voice service for B2B customers. We deliver a data service.
We have messaging services. This connectivity piece will get embedded into UC or Enterprise Communication and Collaboration Tools. We call that ECC. So you will buy maybe your Microsoft package with an embedded connectivity already in the future. And this requires a lot of changes in the way how we organize, but even if we sell connectivity in the communication piece.
Security today is a firewall, which is covering connectivity on an end to end basis in the network. In the future, we see that 0 Trust Networks, Secure Access Service Edge Networks will deliver every application in a different security functionality. This is a big expectation towards telcos to organize that all different elements Off data use in the business environment is protected in a special way. And what we're going to see in the mobile space in specific is we will see dedicated network slices. Interesting wise, nobody is talking any about the network slicing, but 5 gs was always the biggest advantage of it, apart from the bandwidth, Was always the capability of slicing in a dynamic way parts of that infrastructure.
And we foresee that for the different use cases in IoT in the B2B space that we are able to deliver sliced infrastructure for these customers going forward. This creates new opportunities of growth for telecom operators if you differentiate not between 1 or 2 products, But between a variety of use cases in this telecommunication space. The third one is ESG. And by the way, we have started with ESG maybe a little bit late, I have to admit, but as we learned How important it gets for our customers. Today, already 46% of customers, we know They're looking how purposeful and how reliable and how consequent a company is acting in their societal behavior.
And therefore, companies will definitely be chosen, By the way, how they adapt to the social norms going forward. There will be Significant issue coming from the CO2 emission reduction, which Our industry is creating and by the way is able to reduce low carbon economy. The question about our value chains And supply chains is something which is very important and Deutsche the telecom operators are the ones Who are helping all other industries to be more efficient. Think about an autonomous car. By the way, 1 terabyte of data within 8 hours of an autonomous car It's being generated over the infrastructure.
We have to manage that. Think about car sharing. Think about the capability of collaboration tools, less Travel, think about the cloud of the especially the mid sized companies who are not in the cloud environment already today. These companies can save significant CO2 emission by just using telecommunication services. So the telecom operator is the biggest enabler for the CO2 mission in the digital world.
And the factor which is Calculate for that one is 1 to 7 CO2 reduction through telecommunication service in the upcoming future. So we are at the center of this ESG movement if we are driving it right And if we are driving it in a way that we are accepted. The 4th development is the network. And the network, And I have to maybe disappoint you. Don't believe that the consolidation and the consolidation is Bringing this industry to less networks.
We foresee significantly more networks in the future. We foresee a much higher complexity in the network and the ownerships of these networks going forward than it is today. So there will be a multifold of different infrastructure who is providing this new connectivity, which is required from the customers on all angles. There will be a physical infrastructure, which is coming from satellites. It will come from multi regional fiber cores Like City Fiber or KKR here in Germany, there will be the local fiber coast who are providing infrastructure, take the Netco Loans or others.
There will be alternative networks like Amazon Mesh Network, Coipol. There will be Sidewalk. Take GEORION, another Wi Fi network mesh infrastructures, which are providing connectivities, especially in dense areas. There will be campus networks, which are existing in the shop floor of big manufacturing plants or parts or other equations. So spectrum being used for dedicated infrastructures and there will be even some kind of Wholesale businesses who are providing specific services in the IoT case or TowerCodes Who have been providing just infrastructure, passive infrastructure in the ecosystem.
Now think for a moment. Now you can compete And trying okay, we are better than Starlink on the satellite side. We compete, but is this the right approach? We doubt that. We believe that the advantage lays in a kind of network orchestration layer.
We believe what is happening in the content world is happening in the network work as well. So the one who is able to orchestrate Different technologies, infrastructures they might not own, but provided to the end customers, These are the ones who are succeeding prospectively. So the network orchestrator is the one who is winning in this field. But this sounds easy, but from a technical perspective, it's very complicated. How can you organize a satellite into a mobile network Or into a fixed line infrastructure, how can you build it, how can you organize the quality of service, all the things I laid out further.
So We have to see who is first on building the network of networks, who is first to enable this software layer. We have a super advantage because we have accomplished our IP migration. So these services already are able to be steered in a software world, But there are new infrastructures, which we will not own, which we have to embrace and integrate into our ecosystem. With this, we have a bigger reach. With this, we have a bigger market.
And with the bigger market, we have a bigger potential to sell our products towards the customer. And on top of that, the question is how we embrace communication service like Cisco, like Apple, like Microsoft into our infrastructure. We do not want to develop that on our own. We want to build strategic partnerships, But we have to build the APIs, the interfaces to these services in the right manner. The Telco industry will go from a monolithic incumbent to an orchestrator to a network of networks.
And my last thing It's the software layer, which is enabling the services. And Claudia will talk about that in more detail because we are already on that journey. You have again this infrastructure, which I laid out on the previous chart. And I said there is this element of the orchestration, Which we have and which we have to organize in a cloud native, in a kind of software driven environment. But on top of that, we need tools Who are making the service intelligent, unified data and analytic engine services, product services and development Take the Home OS environment, which is easily connected to the different infrastructures, embedded security, as I have laid it out, And platform based services, which are needed to build customers, to identify customers, to authorize customers and the like.
This is
the world which we have to build. We have to build telco as a platform service. This is the next evolution after the IP migration And that is something which I'm expecting from the Nabkos to do this in a consolidated, in a synergistic way that we can scale. On top of that, microservices and APIs enable the customer use cases because we will not develop the use cases our own. Some may be, but most of them are developed in the ecosystem of the over the tops.
This is why they're called over the tops And this is something where we have to make sure that it's easy to connect. It's another form of the Stekkeleiste. Maybe some of you remind the story, the plug in, which we had already in earlier strategies. So this is our 2030 view. This is, let's say, a thing which we should think about.
We should not do some step after another. We should have an orientation. We should have a lighthouse in which this industry might go and where we position ourselves already today. And that is our strategy today. This is what we foresee as paradigms for 2,030, and this is what we do now to Get There.
So the headlines of all presentations of my colleagues are around from connectivity to customer experience by making and turning customers into fans, creating experience around products and services, which are unique. From dedicated to software driven enterprise solutions, we want to become the digital enabler for our B2B customers on their needs which they have in collaboration and communication, in IoT and in the cloud space. People Society from ESG as a high grade factor to ESG as a differentiator. Green Magenta and Good Magenta, our ethical Expectations. Networks from monolithic incumbent to a network of orchestrator.
We build, orchestrate and differentiate. This is already something where our architectural logic is working on. And digitization from vertical solutions to telco as a platform to cloud native API environmental. The prerequisite fund is we digitize and digitize and digitize everything what we have. So wherever we can digitize, We should do that because this will enable a cloud native API based architecture, which we foresee for the long term future.
So coming into the commitments and coming into the next years, The next 3 years, what we want to achieve. And we will have deep dives on each of these topics. So let me quickly go through that. We want to Play our differentiation in the convergence piece in Europe. We are strong at that and we foresee that the FMC penetration in our customer base has a big opportunity to gain more momentum.
Best connectivity experience embracing other technologies, seamless interplay between them and Innovations beyond the core for the services is one thing. Best mobile experience, we always want to have the best Contact resolution fund 55% to more than 62% in Germany. And by the way, we are not talking about idle times. We are not talking about cost We are not talking about deadline compliance. We just talk about the way solve the issue for the customers and we're doing that already today, Stealing with pride from the U.
S, which is called the TEX team of experts, which is now embedded and implemented across all the operations We are running a personalized offline and digital service, first time ride and very much about HeimfernetZoom, the connectivity at home, which will enable a seamless and interruptible free service. Our commitment, 10,000,000 households in FMC. Our commitment, industry leading growth in branded post pet customers. We want to win market share in this regard. Extended all time high customer satisfaction.
We want to increase our customer satisfaction, our Net Promoter Scores beyond the level which we have already achieved in all areas where we're operating and re innovate the brand under the idea of digital optimism, believing into a future, which is getting better through our services. Coming to the B2B. On the B2B, we see 2 big paradigm shifts short term. The first one is the SD WAN development from MPLS dedicated lines to an SD WAN service, Which is more flexible, more affordable for our clients and customers, and we see a growth of 36% in this environment. And we see this enterprise communication collaboration where we see huge tailwind where end customers are spending a lot.
The hybrid way of working is the way of the future, and the ECC is the tool which is enabling this. This is what we are working on, Enterprise Networks, IoT and Security Solutions, Cloud and Digital. And our commitment going forward is We're going to see a CAGR growth of 2% in the B2B, Sarah. I'm very irritated when I see all my Telecommunication players around me always talk about negatives. They're all shrinking in that environment.
We are growing. We are growing already today, and we believe we can grow at least with a CAGR of 2% in this environment in Germany and in Europe. U. S, we will double. We will double our B2B market share from 10% to 20% Because we have the credibility, because we have, for the first time, a better network than AT and T and Verizon at Affordable prices and this makes us strong to gain market share of these guys.
We will double our IoT revenues and even our ARPU In this area, a big enabler and I can talk about 100,000 of SIM cards, which we recently gained with car manufacturers and the like, Which is enabling IoT connectivity to cars. By the way, the chipset shortage is something which is good for us because every chipset is producing data, which has to get allocated in the infrastructure. So therefore, we are in the play. In public cloud, We are expecting that our public cloud servicing is growing by 50%. Coming to the field of ESG.
And I think we can skip directly to the slide. It's not working. Go ahead. We can go to the slide. We have built A new team, a stronger team for all the ESG topics which we have.
And we even have created a new ambition level for our ESG targets. The first thing is 100 percent of electricity from coming from renewables already this year. So every kind of energy we are using in our footprint is already today on 100% renewable energy. This is already, I think, a big step and it cost us 1,000,000 double digit 1,000,000 to get there, But I think it's worth doing it to have a green network. Now the next step, which is new.
On scope 12, we want to, let's say, have a net 0 own emission by 2025. Now you might question, what are you talking? This is electricity, but we still have a fleet. We still have buildings who are consuming energy In this regard, oil and other things. And we are now working how we can reduce even this emission to 0.
So that's the scope and our commitments towards 2025. And then we have up- and downstream Energy consumption, the way how our technology is getting produced, handsets, routers, All this kind of stuff and we have the end customers consuming all the product of Deutsche Telekom. We want to make sure that the net zero emission It's achieved through this value chain at least by 2,040, which is at least significantly ahead About, let's say, taxonomy and the targets of the European Commission and others, this is the scope 3 where we're working on. 3rd, increase in the energy efficiency in our network. Every single discussion should be not only saying, By the way, we help you to reduce your energy consumption.
We should even think about how we can gain productivity in the way how we are consuming Energy in this environment, and Claudia will talk about how she can do this in the technology field later on. Maintain an all time high customer and employee satisfaction. Our people Should be proud. Our people should have a purpose. Our people should understand why they're working every day for Deutsche Telekom.
And we have a big purpose, as I have laid it out already. We are the enabler for future growth. And therefore, we should keep this momentum That people are proud about the tea, proud about Magenta, proud about what we are doing. And therefore, having almost 90% of the people being committed, I think this is unique if I see the benchmark of other industries. And then on top of that, we have ESG initiatives in the recycling field.
And we have said every board member, prospectively, short term prospectively, every leader of this company Schottav's ESG target in his long term incentive scheme. So it's not only that we are committed to something, We will be paid by the fulfillment of our ESG targets, which I'm just describing. And the last thing is, apart from the green magenta initiatives, we have a good magenta initiatives. Good magenta is what are we doing about digital literacy? What are we doing about democratic values in a digital society.
What are we doing about hate speech? What are we doing about all these escalations which are taking place around us With regard to fake news, deep fakes and other things, we are fighting them and we want to stand as a voice in this circumstance. We are by far the leading European telco and therefore we have a duty to tackle these issues. And we just launched a campaign together with Billie Eilish, which was seen 340,000,000 times on the Internet from the next generation. So It has already impact, but this is definitely not one session issue.
It will be a campaign, which we're going to create even beyond today. That brings me to the core of the core, our network. And what you see here is today, we have, as an example, our fiber situation in Germany. 5% is our FTTH position, 83% is FTTC and then we have still some ADSL. We have 100% more or less ownership of this kind of services.
We're going to change that and we're in the middle of this transformation. 60%, 70% of the infrastructure we will own and it will be fiber. We have made a clear commitment that we are now developing a significant acceleration on the silver build out in Germany. We had 600,000 last year. This year, we're going to 1,300,000, 1,400,000 The year after to 2,100,000 and then we go to 2,500,000 households on an annual basis as the run rate of the infrastructure.
This is what we do as owners of the infrastructure. There will be as well external money going into networks, which we embrace whole buy, which is extending our footprint beyond where we are today. On reciprocal terms, Reciprocity is the name of the game. Why should we overbuild somebody? If they have built already fiber, why can't we embrace them into our infrastructure?
So 3rd party will help us to have a big footprint. And you see, we will keep our retail market share. We will keep the same position as we have it today at least. The commitment which we are giving is Germany, we will Quadruple, the fiber to the home output we will attack. We will not be only in the outskirts.
We will not be there where only subsidized monies are available. We have announced Berlin, Dusseldorf, Hamburg, Frankfurt already. I would love to see us being strong in Munich as well, because that's a market where we want to, let's say, play So there are other markets to come soon. We will have additional footprint in Europe. Today, Europe is already at a run rate of 1,100,000 fiber households on an annual basis.
So we want to keep that, even accelerate this output that we are the leading fiber core in Europe. That's definitely our ambition. And therefore, we have allocated money to this one. It's highly profitable because it's easier, it's cheaper to build an FTTH structure in this region. And this will bring us to an outstanding leadership position, not only on fiber, But as well on the 5 gs area, I don't want to repeat that.
You know that. There is no question, no question. Deutsche Telekom will always lead to the mobile space. This is our ambition. We will win every network test.
And by the way, just this morning, OpenSignal They published their test. We have a 30% advantage to our follower, which is Vodafone. We are really, let's say, ahead of our competition. I'm very proud about our technicians who make that possible. And in the financial envelope, which we have laid out, By the end of this year, we will have 90% 5 gs coverage already in Germany.
So that shows you the advantage of what we have created in this environment. In the U. S, I think you know the story and Mike will talk about that one as well later, which brings me already to the end, which is a very important piece, digitize, digitize, digitize. I always say to the company, if you do not understand the strategy, if you do not know what to do, If you do not have a leader who tells you what to do, digitize, because there is always place where we can improve. 3 areas of digitization: Customer frontline, boost the e sales and the digital reach.
We want to have one unique app with a high usage, Service Automation and Remote Provisioning. We are running the biggest bot farm in Telco Industries, 3,000 bots Operating in our network already today, including predictive and predictive maintenance because the more proactive we are, The less complaints, the less costs we are creating in the system. Network in IT, digitize, digitize, digitize. The way of Open RAN, the disaggregation of our network. So the way of running network from a software perspective.
Then rather having it in a very decentralized way is the next thing and this in a kind of agile and cloud native IT. Our IT has significantly improved over the last years. The time to market has come down to numbers Which were even not close to our expectation when we had the last Capital Markets Day. And then we have the operations. Everything internally has to get flattenedized.
Everything has to get automized in a way. We should not bother our people with routines Which we can offer us. And therefore, there's a big boost for internal efficiency via digitization And we commit to another €1,200,000,000 of savings in the organization here in Europe for further Productivity Gains. The ambitions, 30% eSales shares, 25% to 30% eSales sales in Europe, 2 months time to market in Germany and 1 month's time to market in Europe, which makes us much more flexible, much quicker In responding to our competition and even our testing of new products is easier to handle. This is the last thing on the portfolio, the capital allocation.
We want to achieve transatlantic leadership By creating more synergies in our footprint. Due to the fact that everything is going in software, we can jointly work much better together We're doing that already today. Take our TV platform, which is now harmonized around the whole European footprint. Think about the mesh router and the router development, it's harmonized around Europe and beyond that. So we have a lot of areas Where we can harmonize and where we can generate synergies within the footprint of the biggest telco in the Western Hemisphere.
Being in AAA market is by definition an advantage. We have one regulatory or more less harmonized regulatory Environment with less risks, which helps us a lot. Number 1 in Europe and soon number 1 in the U. S. This is our ambition rate.
This is leading. Build once and scale, I made that already and the one app It's another example on how we are driving it. We have just joined and integrated the team on this airfield that this development is just taking place out of one hand. And a repeatable playbook, Leverage the best practice around the footprint. And this is not only for operations.
It's as well in the way How we do portfolio and M and A. Always trying opportunities. We don't say we are selling and we are buying. We are even trying to do forms outside of the balance sheet. We are trying to do things that we have maybe even minority shareholders in some areas to create upsides a later stage.
And that is the way how we are driving things. And this repeatable playbook, which we have learned, It's even stronger because we have one single business model in our organization. The commitment, We want to increase our return on capital employed for the German operation by 50%. We want to double the B2B market share in the U. S.
We want to scale the 1 app beyond all the footprint and we want to have 80% of the router base with an own operating system. By the way, even the Home OS, which we are developing, which is bringing all the home services together is something which we are launching soon. So more to come on the product events. So this was my journey In a nutshell about what we are doing, we are very, very ambitious in how we see the future. And the headline, as I said, it is acceleration.
Acceleration. Revenues, 1% to 2%. Okay, you know that number, but nobody is interested about Revenues from handsets, service revenue matters, the utilization of the infrastructure matters, 3% to 4% growth. So we believe in a significant growth on the service revenue side. EBITDA, the group is going to grow by 3% to 5%.
This is 2% more than what we said last time. Adjusted EBITDA grows by 5% to 6%. This is significantly more than what we said last time. Free cash flow today €8,000,000,000 24,000,000 beyond €18,000,000,000 Another €10,000,000,000 in the year 2024 on the cash flow, which we are generating today. And ex U.
S, we're going to bring it to the €4,000,000,000 here. Adjusted EPS, we go to €1.65 65%. And the ROCE should be beyond 6.5%. The CapEx envelope is designed Ex €8,200,000,000 is the vicinity on how we are investing and indirect costs should get reduced by 1.2 €1,000,000,000. The share of remuneration based on the EPS with a payout ratio of 40% to 60%, which gives a perspective to grow our dividend significantly over the next years.
Look, I think Dutch Telecom is not an excellent. The strategy is something which we're working very hard on it. It is Taught it from 250,000 people in this organization. I commit that we again will deliver of what we have promised. We see the future as a growth future.
We see us positioned very well from a portfolio and the markets we are operating. We have a differentiator, which is around our infrastructure. We have an idea about how we are developing this company towards a new layout for the generation 2030. And with this, I'm very optimistic that we will create more value than the other telcos. Thank you very much for listening.
Thank you, Tim. Thanks for this great for setting this framework for us. Maybe you can join me now for the Q and A. We don't have too much time for the Q and A now, but we have Tim back on stage tomorrow after the last session. So let's have a couple of questions right now.
I can see already Polo Tang from UPS there on the WebEx. So, Polo, maybe we start with you. Can we have your question, please?
Yes. Hi. Thanks for taking the questions. Thanks for the very upbeat presentation. So I have one question, which is just on shareholder returns And the $60,000,000,000 buyback at T Mobile U.
S. So it's very clear that you want to get to a 50% shareholding in T Mobile U. S. But once you reach a 50% shareholding, are you likely to participate in the TIMO U. S.
Buyback program? And if so, And what would you do with the proceeds?
Okay, Paolo, thank you. The first thing is first step after the second. So the first step is we have a Big commitments towards our build out program in Germany on fiber and on 5 gs. On top of that, we want to achieve This is majority position, and we haven't taken any decision on whether we will take part of that program or not. I would expect us having a 50% plus position that we then will more think about how we can do the allocation of that money, Whether we do debt reduction or other things, I would not see us immediately, let's say, participating and extending it.
I do not see an immediate value out of that, But that would be my spontaneous reaction of today. So now taking first 51 And then letting the whole equation being reviewed again.
Okay. Very
good. Thank you, Paolo. And so the next question oh, I can see you, Andrew, at Goldman. So hi, Andrew. From the trading floor, I can see.
That's good. Okay. So can we have your question, please?
Yes. Hi, Tim. It's great to see your ROCE targets today, which ultimately come down to growth and costs. When we saw you in Bonn a couple of years ago, the main question mark on that was probably on sustainable growth. And it's actually it's an upbeat thing to hear about Telco, you're talking about growth.
You've since delivered on that nicely, and your guidance from here is more credible as a result. But right now, there's a heightened The uncertainty in the sector, on what you described as the investment you put into the wheel. And so I wondered if you could talk a bit more about how much visibility and certainty You have on CapEx intensity and also how you flex for the spectrum that fits into that. Just to give us some confidence that we don't get a CapEx warning Over the next couple of years like we've seen across the space over the past few weeks months. Thank you.
I think the uncertainty The less capital market was significantly higher than it is today. Last time, we had an unclear position on the U. S. Last time, We were not clear how to play the 4 gs game and extend our footprint to where we are today. Last time, we had this big Auctions AWS in front of us in the U.
S. Last time, we had just announced that around the Vodafone integration of fixed line and mobile services here in Germany and the competitive challenges we were facing. Last time we had portfolio assets which were not running Operationally, well, like the Netherlands. So today, I can tell you I'm sitting in a portfolio, Which is more or less fixed in every regard. We're still working on the systems.
We can talk about that. But from a total equation, that is For me, from an outlook perspective, the most uncertain one because I do not know how these markets are recovering after COVID and how much of this How much of a we are participating in that growth. But that said, I see that. The second one is, I do not see super significant auctions coming. We always had this kind of buckets in our planning and anticipating big auctions.
This time looking to this one, it's much more foreseeable what's coming. This is millimeter wavebands which are coming. There are some European markets with 5 gs services coming, which are not that big. I do not see significant big auctions on the horizon, which will eat up into our balance sheet. And on top of that, our position think about our position in We are ahead of our competition with 5 gs services and build out.
We have a very clear view that how we what we need as CapEx to Stay ahead and what is needed there in the market environment. So look, I'm very confident to the German build out because what we have changed is and by the way, this is even a regulatory approach. Look, in the past, people were saying, we won't expect that you build a new monopoly. We don't. We will make safe that we will protect Our market share at least said that.
We will have a decent share of wholesale because the deals are already made in the vicinity of 17,000,000,000 For Germany as an example, so we have a decent wholesale share on top of that one, but we will not build the whole country. So there will be others doing it. So why should I overbuild others if these guys are opening up their infrastructure to us and we can sell Magento services as well in this region. This is the way going forward, and that keeps me more relaxed than this Attitude of saying we always in the fixed line business have to own a monopoly for the whole country. So I think this is a new learning that we do not have to own Whole infrastructure.
We hope to own the majority. And the argument is at 60, is it 70? This is, let's say, the pitch which we are doing. That just gives us credibility. But beyond that, we will have a lot of holdbuy deals, and therefore, we are limited on this exposure.
I think it's even a capacity issue. Building now 2,500,000 households in Germany, this is a big Stretch target for an organization and even for our external service partners. So therefore, look, I'm Maybe I'm too optimistic. Challenge me on this one. But for me, the perspective is more Easier to take than it was 4 years ago, and that is why we gave you higher numbers.
On top of that, we have a better control about the fixed line market in Germany. You see our market share beyond 50% on the net adds side. We have no line losses anymore. So even the constant revenue stream We are getting out of this. The growth was around 5 ish already.
It's something which gives me confidence that we are well positioned.
Great. Thank you, Andrew. Thank you, Tim. And I can see Akhil not at the trading floor, it looks like. And Akhil.
Can we have your question? And then we have one more, and then we move on to 3 d. Okay? So, Akhil?
Yes, great. Thanks very much. It's 2 very quick ones, hopefully. So One is on towers. Tim, you mentioned, as you have before, that you see yourself as the kingmaker when it comes to towers.
I just wondered with strategic review you're talking about, whether that changes the options you're thinking about. I think in the past, you've said you are ruling out an IPO, You were ruling out a disposal. It was more trying to find ways to create incremental value. If you could just maybe talk through whether there are other options now, whether you're thinking around that's changed? That's First one.
And then the second one is, you've talked a lot about the network of networks and this aggregator strategy as Deutsche Telekom going forward. How important is scale to that? And when you think about Europe, which remains very fragmented, do you think that, that means that as this industry evolves, Scale is incrementally important. And do you think cross border consolidation, therefore, becomes more important too? Thank you.
Very good. Look, the first thing is, we have been at the forefront of carving out our towers. And we have, I think over the last years, very much professionalized the operations in Europe on the tower side. And We have increased our EBITDA just from my mind €150,000,000 on top of that. So not going to the market with a low performance, but having Already, let's say, taking the low hanging fruits on the services, which will give us a better value.
We have seen that even the market contributes, I think it was €6,000,000,000 or €8,000,000,000 Now it's around €12,000,000,000 value to this thing. So they see this value enhancing. We have seen That the Americans have positioned themselves into the European space as well. We have seen Cellnex scaling up their business. So We saw the multiples between U.
S. And Europe coming very similar. And on top of that, we see that everybody's positioned themselves to become an industry leader in this space. So we saw high multiples beyond 30 on these businesses, And we don't believe that this business these multiples are going now significantly higher on this one. So now it's the right timing to think about to play in this game, because the fantasy of something organically is more limited.
So we have now an asset on hand we can play with. We can consider selling the majority. We can sell a piece. Look, I want to send Langhaim out there and come home With a fantastic deal, I'm open to every option, to be honest, open to every option, but it has to be a good deal. It has to be a fat and juicy deal for Deutsche Telekom.
And that is why I think it's now the right timing where everybody is positioned and nobody is talking about theory. These companies are now built and they are the players are there and there was never so much money in the market. So I think this is now the right thing. Look, I hope that we can come soon coming back to you guys and show that we're doing the right Deals here, Thorsten will talk about that one in more detail later on, but that is indeed the strategic topic. Network of networks, thank you Because guys, I think we have to think about the future because otherwise we will not understand that the companies Telco companies are long term positioned.
So the network of networks and the aggregator strategy is something you have to invest, you have to learn, You have to cooperate with hyperscalers in this case. So are there enemies? Are there frenemies? What role do they play? This is the thing where we have now to start working on.
And scale is important Because the bigger the aggregator is, the better the economic scales gets in this ecosystem, the more your incremental cost of IT investments are getting lower. And therefore, I think it's important, but who is better positioned in Europe than Deutsche Telekom? Now compared to the U. S, compared to Asia, We are subscale. And therefore, I'm calling desperately calling as a European citizen for It's harmonization for a single market of Europe.
We needed to survive. We needed to Play a relevant role in this piece prospectively. So I'm not driving politics. I know that the single market is still far away. I'm calling for bigger consolidation, but Deutsche Telekom is not sitting here and willing to invest Cash into buying a company and then integrating it.
That is not what we are looking for. But I hope that this market is coming into consolidation, That we are creating £200,000,000,000 £300,000,000,000 this year who are able to create the same economies of scale like other markets. But this is the way which is very difficult to predict. And prospectively, with the software development, the cross Border consolidation maybe gets more juicy because you have better economies. Look, at that point in time, I can only tell you there's no activity in this regard.
Europe is on a little bit on a way in this network issue to get become more nationalistic Due to all the discussions we have in the political landscape, but prospectively, we need a single market for Europe. I cry for that.
Thanks, Tim. Thank you. That's very good. I mean, we are very short of time now. So Usman, great to see you.
Let's have a quick question and a quick answer maybe so we can have time for Germany and the other subjects as well. Thank you, Pat. Good to see you.
Hi, guys. Thank you for the opportunity. It was just going back to the strategic question Telco relationship with hyperscalers, particularly in light of the deal that DISH is doing With Amazon in the U. S, so from your overview, I mean, it's clear that more and more of telco kind of network data will be running on cloud Service hyperscaler service, more of the network will be run as software, again, On commoditized kind of hardware, through network slicing, I guess, you have a situation where Hyperscalar Scan in theory run telco networks directly into customer premises. So the question was really, I mean, how are you as an organization managing the Potential disintermediation risk.
And to what extent does the telco kind of Connectivity model need to change in order to be able to get more upside from this relationship with hyperscalers and not to be Reduce down to just providers of commodity or connectivity or just price down all the time?
Thanks. Look, thank you very much for that good question here. It's at the core, and I have to be now fast at the very complex question. Look, The thing is, you have to manage your dependencies. And there's one dependencies, the hyperscalers will not go away.
And there will be definitely, let's say, service which they're providing and where we can benefit from. We have to bring the physical connectivity And the logical connectivity, we have to bring that together. This is how we make services and quality of service for customers available. This is, I think, the logic. Therefore, we need hyperscalers prospectively.
Now the question is, we should not become dependent on 1 hyperscaler. So this multi cloud approach is one of the solutions that you're not relying only on 1 hyperscalers in the way how you clarify your infrastructure. The second thing is, look at the car industry. The car industry is embracing big time Amazon And Microsoft is to their services, but they're not losing value chain. They take them as a service provider.
And this is the way how we think as well about it. We are not building the cloud ourselves. We are not running it. There will be critical pieces which we have To control ourselves, there will be pieces of the network where we leverage our network. Think the housing of edge clouds.
I can believe that we do that with hyperscalers together, and then there will be pieces of it. I think the value for us is In the centerpiece, which we're having, on the other on the one side, orchestration infrastructures from us and others. And on the other side, having always the access to 260,000,000 customers in our footprint directly, including our B2C relations And B2B relations and for me, the hyperscalers can enable our services which I laid out earlier, quality of service, different Carrier grades and alike in a kind of intelligent way. I do not see them that they really substitute us. I think they will help us to enable this orchestration and the cloud native approach of our infrastructure, and we will select Not only one, we will work with different players together.
That's the way how we how I see the future going forward. But Claudia We'll talk about that tomorrow, hopefully for you in a more clearer way. That is the way which I want to drive. You cannot just Ignore them. You have to embrace them, and that is why DISH and Amazon are working together in the U.
S. And I think Rakuten is on the same journey. So therefore, we should adapt that.
Yes. Thank you, Tim. If you can't beat them, join them. But thanks for the straight framework. And as you can see, the idea of today is we won't rest on our laurels.
On the contrary, we will accelerate. So how do we accelerate in Germany because it's a great asset? Well, we got the guy from Europe who formerly Europe, he's actually already here running the German business for quite some time.
He has to accelerate. Yes.
And now he will accelerate. And if you talk to us how he will do that. And I cannot think of anyone better suited for this than Srini. So we look forward to now Hearing, Srinivas will take Germany to the next level. Thank you.
Thank you, Hannes and Guten Tag. You can see 7 months into the role, my German is already fluent. No, but seriously, before I expose my numerous shortcomings with the German language, Let me move to talking about the German business. So it's my pleasure and honor to spend the next 45 minutes Talking to you about where the German business is right now and where we're going. So without further ado, let me jump right into it.
So where is the German business right now? I think the German business is in a really solid good place. We've delivered reliable, predictable financials on the back of solid operations. And through this And on all of this, despite the fact that we've gone through a fairly large transformation, One of the biggest that I think any of the incumbents in Europe has gone through, the IP transformation, which gave us Its own headwinds and I'll talk in more detail about that. But where we are is a really solid foundation, a place that delivers Solid financial results, a great experience, a really good brand and a solid operation.
Question is, where do we go from here? Now this is a question I've been asked often within the organization over the last 7 months and often in German. And so that leads to one of my favorite German words, by which we mean acceleration. And so the vision really for the next 4 years is to take the solid foundation and accelerate from there. What does acceleration mean?
Accelerate in terms of building out the networks for the future, Accelerate in terms of our revenue across consumer and B2B, but also accelerate in terms of our internal digitization, So that the combination of all of that creates an acceleration of EBITDA that self funds the fiber rollout. And last but not least, use all of that accelerated EBITDA, allocate capital well, so that it's not just EBITDA, but also return on capital employed that accelerates. So it's a story of acceleration built on a solid foundation, which you can see has a lot in parallel with the way Tim was laying out the story for the group as a whole. So let me now dive in a bit into our performance and the solid foundation that I talked about. I'll start with just reflecting on some of the commitments we made in our last Capital Markets Day and how we've performed against those commitments.
Now, the commitments were 2017 to 2021 And the numbers you can see here are actual reported numbers from 2017 to 2020. So as I talk to each of them. I'll also give you a flavor of how 2021 is turning out. Let's start at the top with mobile service revenue. Now we committed to a 2% mobile service revenue growth.
Our actuals 2017 to 2020 We're 1.4%. When you take out the corona effect, it was actually about 2%. And as we look at 2021, We're pretty comfortable giving us a tick on mobile service revenue. Let's talk about fixed service revenue. Here, our landmark strategic decision of actually going down the route of vectoring changed the game for us on broadband.
So on broadband, we had committed a 4% 3% to 4% growth. Now the reality is We're storming ahead of that, 4.6% delivered till 2020. Quarter 1, 2021, 6.4% broadband growth. So clearly vectoring is paying off in spades. If you look at our EBITDA commitment, we said 2% EBITDA growth.
We've delivered 1.9 percent 2017 to 2020, that despite the headwinds from the IP migration and I'll Talk about them in a little more detail on the next slide. And 2020 itself also had the COVID headwinds. So our 2020 EBITDA growth rate was only 1.4%, which brought down our overall growth rate in this period. But when you look at Q1 2021, With a lot of the headwinds behind us and some of the headwinds of IT migration turning into tailwinds, you can see the acceleration. We grew at 3.4% in Q1 2021.
Cash, the last of those numbers, we said 4% to 5% growth. We've clearly nailed that at 4.8%. So financially stable, predictable delivery.
Let me
talk a bit about IP migration, because I mentioned it earlier. Look, we are the only scale incumbent in Europe who's really completed the IP migration. This was a tough journey. What did the IP migration involve? Essentially Swapping out all our legacy infrastructure to put in an all IP network, especially with B2B customers.
This was also the effect of equivalent of cleaning up your back book. Now we started in 2014, But it really peaked in terms of impact in 2018 2019. So in 2018, we had 700,000 line losses 2019, 800,000 2020, 200,000. 2021, an even lower run rate. The drag of this on revenue was about $100,000,000 a year in 2018 2019.
It's about 0.5%. Now it went away largely in 2020. You didn't see it in our results because COVID hit us at the same point. But when you start looking at 2021, you are beginning to see the release of that and the tailwinds coming in. So our service revenue quarter 1, 2021 grew by 1.7%.
Now the IP migration didn't have headwinds and effects Just on revenue, it impacted cost as well. So, installations peak, because you've got to physically go there and change out the legacy network. Our installations are now down 30% from peak. And last but not least, and this I think will be the most telling factor for the future. The IP migration Gave us the ability and I think we're the only incumbent in Europe who has this ability now to really build modern, Technologically sophisticated products such as SDX, Enterprise Cloud Communication on top of our all IP network for our B2B customers.
So, solid financial delivery in the face of a tough IT migration. How we achieved all of this? I think the core of a lot of this has been operational excellence. If you look at the chart here, we have seen complaints go down by 66%, A 20 plus percent increase in first contact resolution. That's impressive.
IT time to market going down from 18 months to 3 months. After that the fact that and I've now worked in several incumbents, our IT infrastructure is amongst the most stable that we've that I've seen amongst incumbents. What's the payoff of a lot of this? Record levels of customer satisfaction And record lows on churn, further testament to our strategy of invest in the network, invest in service, good things will happen. And that's Not just us saying it, you can see we won most of the awards possible in this space.
So solid financials, Tough migration handled well. Delivery despite that, based on solid operational foundations. I'm going to close off looking back With a quick sense of our other commitments, specifically the ones I didn't touch on earlier, I'd like to start by highlighting cost. It's a bit of a myth here that you can't take costs out in Germany. We reduced a €1,000,000,000 in costs across GHS and Telecom Deutschland.
We reduced our workforce by about 10,000 people between 2017 2020. So you can take cost out, you can drive efficiency in Germany. I then want to spend a few minutes on the Ambers. So B2B Growth, We said €500,000,000 We delivered €110,000,000 Correcting for corona, we had about a €240,000,000 impact of corona, Which was mostly lost roaming as well as the big IT deals, we delivered €350,000,000 And I can always stand here and say, yes, IP migration was the rest of it. But Cold hard facts.
I think we would have liked to have delivered more on B2B growth and we'll talk about our plans going forward. The second area Amber, I want to spend a few minutes on is fiber rollout. We said we would get to a run rate of 2,000,000 homes per annum. Last year, we delivered 600,000, this year upwards of 1,200,000. But in the last quarter of this year, we will be running at close to 500,000 homes per annum Sorry, 500,000 homes in the quarter, which is about 2,000,000 homes per annum.
So we'll get there. But truth be told, we would have loved to have got there a little quicker. And the last area of Amber is then our revenue delivery where we said we would deliver a percent in growth. Reality, we've delivered flat revenue. Now some of that is because of corona.
Without corona, it would have been 0.4%. But I think the more important piece, which is Same point Tim made, when you look at service revenue, we actually delivered 0.7%. We chose to let go to some of the lower margin revenue, but still a near miss, so an amber rather than a green. So that's the scorecard and the state of the past, A really solid foundation. Let's now start talking about or acceleration.
I'm going to skip through the first slide on this. This is the slide So network acceleration, where are we on 5 gs first? As Tim said as well, we today have 80% coverage on 5 gs. Now this blows my mind a bit. I've been in the industry a while.
It's rare that you find a case where with a new technology being introduced, One player has twice as much coverage than the next competitor. And the task going forward from an acceleration perspective It's how do we now really get efficient about 5 gs deployment and more importantly, how do we monetize it? Let's talk about the fixed line infrastructure. I think what was strategically brilliant was the choice to go down the route of vectoring. What has vectoring given us?
Several things. We now cover 83% of the country with vectoring and super vectoring. Our choice of going broad and high speed versus narrow and gigabit Really paid off over the corona crisis because we could almost overnight allow the entire country to start moving to working from home. The other big advantage of vectoring is in the fiber rollout. Now our last mile in Germany is shorter than anywhere else in Europe because of the depth of our vectoring coverage.
So the last mile in Germany It's 200 to 400 meters. That's a lot shorter than elsewhere. We'll come back to why it's still so expensive to roll out fiber. But The length of the last mile, of the shortening of that length was a huge achievement of Vectoring. As a result, we have a copper network that delivers That can deliver up to 2 50 Mbps and for a large number of customers already delivers more than 100 Mbps.
That's different from a lot of places in Europe. So how do we build on that foundation and accelerate? Let's start with fiber and how we accelerate. Now, I already talked about this at our Q4 earnings call, where we laid out our target of 10,000,000 homes By 2024, with getting to with our competitors, 100% fiberization of Germany by 2,030. Now since then, I've spoken to a lot of you.
And typically, there are 3 questions. The first one, I think Andrew was kind of subtle in the way he phrased it, but How do you know 10,000,000 homes is enough? Is there another CapEx warning coming around the corner? The second one I've dealt with is, tell me more about your fiber strategy. How do you decide where to roll out?
What's your strategy? And the third one typically is how do the economics of fiber work? How does this contribute to monetization? So let me deal with them 1 by 1. Let's start with is 10,000,000 homes the right number?
We are convinced 10,000,000 homes is the right number Because we believe that's the number we need to get to above 60% infrastructure share. What drives that conviction? Three pieces. Firstly, the demand side. Now, I've seen fiber rollout in over 10 countries now.
Consumer behavior remains quite clear. There are 2 principles. 1, most consumers Hate having to move infrastructure and change their in house wiring and everything else, unless that's the only way they can get high speed. 2nd, most consumers upgrade the speed of their line one step at a time, at most 2 steps. So they go from 16 Mbps to 50, 50 to 100, 100 to 250, 250 to a gig.
Why did they upgrade 1 or 2 steps at a time? Because each step Normally comes with a 15% price premium. Now you take those two principles and all the data I've seen in Germany suggests that those two principles still hold. Now you add a couple of facts to those principles. 1, over 80% of Germany has vectoring available.
You take a second fact, which is that in our retail plus wholesale 25,000,000 customer base, 80% of customers are at least 1 or 2 steps away from the peak speed that their line can deliver. What does all of that mean? For the next 4 to 5 years at least, a lot of the demand for fiber will come from the 20% non vectored areas and the 20% in vectored areas who have already reached the maximum speed potential of their line, Which means there will be demand, but that demand will be focused in certain pockets and that demand will grow because what will end up happening Is that more and more people will reach the peak potential of their line speed, but it will grow steadily. There isn't a flood of fiber. There's a steady nice growth in demand for fiber.
And when we work through the math of all that, we come to the answer of 10,000,000 lines will comfortably put us in a place Off 60% infrastructure share, assuming people build in economically sensible manners to drive demand. There's a second factor which convinces me that €10,000,000 is the right number, which is supply side dynamics and Tim referred to this. Germany, It's bloody hard to build out fiber. You have 2,700 different municipalities and there's my favorite German phrase now, Ganemigungan Serfarin, which is the process by which you get permission to build. That has to be negotiated with every single municipality at a local level.
And by the way, the municipality doesn't necessarily always give you permission to do microtrenching, in most cases Almost never gives you permission to do overhead. What you get permission for is Tiefbau, which is expensive and takes time. So it takes time to scale fiber in Germany. Now you add to that the fact that construction capacity is pretty limited And scaling fiber in Germany is a lot harder than what I call fiber to the press release. So, there are a lot of people doing press releases on The amount of money they've raised and the rest of it, it's bloody hard doing that with 2,700 municipalities.
We'll come back and talk about some unique advantages we have in that context. I that supply side constraint also makes me really comfortable that when we scale this machine to 2,500,000 households, we will get 60% infrastructure share. Last but not least, every good plan has to have contingency to it. Now our plan has flexibility, Firstly, because it's self funded. But there's an important element of weaving room that we think is critical, which is external funding.
Now what do I mean by external funding? I mean raising external funds in a manner that we get as close to owner economics as possible And raising external funds with a JV with as much independence that allows us to get off balance treatment. What does that look like? Think KPN APG. We really like that model.
Now we're in quite progressed conversations on getting there Right. Let's go to question 2, which is how do we think about our strategy for rolling out fiber in Germany? In many ways, it follows exactly the same principles of supply and demand. Now the way we think about Germany, firstly, is to start de averaging it. Let's start with the quadrant on the top left here, which is areas where We have an FTTC network and there is fiber competition or coax competition more likely.
This is typically in the large cities, so the Berlin's, Hamburg's, etcetera, of the world. And here also a lot of customers live in the multi dwelling units. So how do we decide where we roll out here? How do we actually scale this? We start with the supply side.
So the most important thing here Is to absolutely make sure that you get the municipalities on-site. Berlin, great case in point. We committed to rolling out a 1000000 households in Berlin, Because we have a deal with the city where they have made massive improvements in their permission process. They have digitalized a lot of it. That helps Take out costs that helps cut time.
We also look at making sure we get agreements with the multi dwelling units So that we can put our fiber in there. Here, what has been achieved with the removal of Naben Coste and Trevalig is massive because it suddenly changes our ability to get into these buildings. Obviously, the other factor we look at here is how utilized are these customers, to what extent do we see demand as people Our getting close to top speeds. And again, in a lot of metros, that tends to be quite high depending on the area you're looking So that's how we think about the first set. Now in the first set, these are not just kind of empty concepts.
We've and started now declaring our plans by city. So we declared a €1,000,000 in Berlin. We will do €1,000,000 across Frankfurt, Hamburg and Dusseldorf. And we're now laying out detailed plans for city. Let me now go to the next quadrant, which is the top right.
Now this is areas where we have FTTC and there is no alternative infrastructure. Now these areas are They are very different and there's a lot of distribution between in these areas because they range from the outright rural to just outside the city. And therefore, there is a massive deviation in the cost to cover here. So it can range from €900 to €5,000 in these areas. How do we decide where we go here?
What do we do here? Again, the same supply and demand side factors. So let's start at the supply side. Freiburg is a good example, really good cooperation with the city council, helped bring down the cost to build. Other factors we consider here, clearly the most attractive areas in this quadrant are ones with the lowest cost to cover.
So we proactively go ahead there, so that we can prevent cherry picking. Now these areas from 2023 onwards will also become available for subsidy And we'll compete hard and win a lot of subsidies in these areas. Let's talk about the 3rd quadrant here, which is the bottom right, which is kind of really rural. Now this space, you have no FTTC and no competing infrastructure. It's the center of the government subsidization program.
Let me give you some facts here. When you look back from 2013 to today, We have won above 60% of all the households that have been subsidized. In places like Bayonne, our win rate is actually 80%. So we like the subsidy program. It's very sensibly structured and we will continue competing and winning in this space.
Now to the bottom left. This is pure market share gain territory, honestly, because here, We're in a place where there is competing fiber or coax infrastructure. We don't have FTTC and our shares are quite often lowest here. How do we attack the space? Again, supply and demand.
Good way into supply, partner with a local utility. Example, Glass Plaza Northwest, where we're working with A. V. A. Tel to build out here.
But there are other options and models as well. The other thing we're looking at is, if the costs are low enough and there's high enough utilization here, let's go for it and overbuild, right? And the worst case of the last resort is we will hold by and continue to provide our customers with this. So I hope that gives you a sense of how we think about De averaging the German fiber monster, right, and how we think about going about it. The one thing in common with all of these It's the way we approve projects and commit to building.
Every project has to deliver greater than the hurdle rate of return or the hurdle IRR, Which is 7.5% post sorry, 7.5% pre tax. What that means is our average is not 7.5%, The minimum, our average is clearly north of that. So that gives you some sense of how we think about the different de averaging of fiber. Let me go to the 3rd question, which was how do we think about economics of fiber? Three big factors driving the economics of fiber, ARPUs, utilization and CapEx.
So obviously, a 4th, which is market share gain, which we will have in some areas, But I'm going to focus on these three right now. Let's start with ARPU growth in retail, right? Now our retail ARPUs have followed The earlier principle I was talking about, which is customers upgrade 1 step at a time. And as we rolled out more and more vectoring, people moved out from 16% to 50%. That's why we saw a 5% ARPU growth from 2018 to 2020.
As we roll out fiber and add to that infrastructure, It will fuel the ARPU growth. On the utilization side, we're sitting today at 51% net add share, which is well ahead of our fair share. We will certainly defend at least 40% net ad share in retail. That combination on the retail side fuels the monetization of fiber. On the wholesale side, again, the same two factors.
What gives us almost the bedrock of utilization is the long term wholesale deals we have with our partners, 10 year deals. What drives ARPU is a really forward looking framework from the D Net SAAR, Which is structured around More for More. And I think, Hannes talked about this in detail in the Q1 earnings call In terms of the trajectory and why in 2021 2022 we see a slowdown and after 2023, we see the growth. But the reality here is Our new commitment tariffs have a price increase for 50 and 100 Mbps, but more importantly, a clear more for more growth path on fiber. So you pull that all together, the ARPU and the utilization levers across both wholesale and retail drive the revenue side of fiber.
Equally importantly, driving down CapEx efficiency. We are committed to reducing our CapEx per home passed by 25%. Let me be clear by what I mean by that. That is CapEx per home passed like for like areas. Obviously, our overall CapEx per home pass depends on our mix.
So we roll out more urban, we have lower CapEx per home pass, more rural, higher CapEx per home pass. But on like for like basis, we will take it down by 25%. Is that a pipe dream? Not really. Quarter 1, We are already running at about a 5% to 7% efficiency.
So we're already beginning to really move the needle, so that by the end of the period, we will definitely be at a place of 25 Percent Lower CapEx per Home Pass. What drives this? Four things drive this, right? Number 1, scale. So that allows us to standardize processes.
That creates massive efficiency. Number 2, digitization. Claudia will talk tomorrow about how much we've reduced our time to plan. But digitization across the fiber factory is a very powerful tool, including with things like TCARS, which allow us to map out an area before we go into that and give us a reliable sense of CapEx, The 3rd big factor here is what our scale gives us in terms of committed relationships. So we talked earlier about construction capacity.
We have 70% of our construction capacity for 2022 Already signed and committed. We have a similar number even for 2023. Why do we have that? Because of scale, Because of our willingness to do long term deals and our willingness to do turnkey construction. Last but not least, my favorite topic again, Baron, right.
Now the beast that getting approvals from local municipalities is hard, But it's a lot easier when you have 13,000 people who are deeply regional, come from the area, are able to talk the dialect, can work with the local municipalities to actually get us microtrenching, to get us the local permissions that we need. So that combination of things is why I'm confident about the economics of fiber and about the 25% CapEx reduction. Moving on to the next piece of Accelerating our infrastructure, which is 5 gs, building on the head start that we have to drive efficiency and to drive monetization. The head start that we have is not just in coverage, but also in total spectrum deployed and importantly, especially with 5 gs, Number of sites backhauled by fiber. We have a 75% connect rate of our sites to fiber.
Now how do we drive efficiency On top of this, similar to the way we've actually been really efficient by using DSS as the way of rolling out our fiber, We are now retiring 3 gs and we will use a lot of that spectrum for 5 gs. We are looking at small cell deployments to further increase the efficiency of our 5 gs. On the monetization side, I think the 1st couple of years of 5 gs will be monetizing using B2B. I think there's order of magnitude, A low three digit million number in terms of the size available as opportunity for us to go after with IoT, with campus networks and I'll come back and talk about that. On the B2C side, most of the monetization will come from upgrading our customers to higher tariffs.
And again, I'll talk about this more on the B2C side. So that was the heart of Network Bischloinigam. I'm going to now move on to talk about Our B2C area and what drives acceleration within our consumer business. Let's start from where we are. Where are we today?
A really strong consumer business that gets its strength from product leadership In each individual area, so we're clearly product leaders in mobile, fixed and convergence. And we have a really powerful brand That pulls it all together. Where do we go from here? How do we build on top of this? I think the next part of this journey, very similar to Tim's articulation of being experience led, where we think we can unlock growth from here in is from going from product leadership to really growth driven by loyalty and owning the household experience.
What does that mean? What does that look and feel like? So starting off with how we create growth from our existing customer base. I've already talked about the fixed line side And the amount of upside left in monetizing our base, 25% of our retail customer base today is sitting on greater than 100 Mbps. There is a huge opportunity as the demand for speed goes up for us to monetize this.
We will see 100% to 150% increase in the percentage of our customers who are on greater than 100 Mbps. And with €5 typically per upgrade, that is a lot of revenue. The second part of our upgrade story is in mobile, where we will see a 50% to 100% increase in the number of our customers on the largest tariffs. Now, how do we do this? We can learn a lot from the playbook in Europe, in the DTE European countries who successfully driven a more for more, including an accretive ARPU strategy by really managing channels well rather than by discounting.
I'll come back to this theme in a minute when we talk about Convergence. But the important thing is this not just gives us more revenue, but you can see with the chart on the left, it gives us significantly happier customers. And that's a big part of creating growth through loyalty. The second part of the playbook for driving growth in consumer is convergence, It's really beginning to own the household. Today, we have 11,600,000 retail broadband customers.
Stick a finger in the air that probably means 20,000,000 SIMs in these households. 5,000,000 of them are magenta, Gives you a sense of the opportunity available for us on convergence. Again, taking a leaf out of the European playbook, We're at about 51% convergence in Europe. Now how do we get there? Because 4 years ago, we were about 25%, 26%.
We got there through very, very disciplined execution. We didn't get there through discounting. What does disciplined execution mean? It means every time you walk into a store, every time you make a phone call, every time you use the app, and I know you're an existing broadband customer, A combination of channel incentives, data in the ecosystem, my CRM, allows me to speak to you about the benefits of getting on to a convergent package. That and the heart of it is what unlocks all of the good stuff in convergence, the 50% churn reduction, the higher ARPUs as well as the higher customer satisfaction.
Now that's very much the first two steps or as Tim would say the horizon one of this, equally important Is now binding this together in a true converged product experience. I know Claudio has got a lovely video on this tomorrow. So I'll leave you just with the headlines of this. In the end, we own the 3 most important and sticky gadgets in a consumer household. The router, which decides where you get coverage, your TV with Magenta TV and the mobile devices.
Now, Our vision here is to pull them together in a seamless experience so that you get a genuinely converged product feel. So that gives you some sense of what underlies the B2C growth story, the B2C acceleration from product leadership to loyalty and household experience driven growth. Going to move on next to B2B. Now B2B is interesting, right, because B2B is I'm sure a lot of you see it as the graveyard for incumbents on growth. Now fact 1, our B2B business has grown 0.7%, it has grown in the last 3 to 4 years, which is more than you can say for most.
It's grown despite the headwinds. Three significant headwinds, IP migration 100,000,000 a year, corona 240,000,000 and We went through a difficult process of integrating a €2,000,000,000 TC business from T Systems last year. Despite those headwinds and challenges, it's grown. Why? Because of an incredibly strong market position, Really good distribution, good service and a great network.
Now you put that together and you get what's now a common picture I'm sure for you, a solid foundation On the basis of which we can accelerate. 1 of the biggest forces that's emerging for me in Germany now is The flood we're seeing of businesses beginning to digitize, things like the European Recovery Fund, where 20% of it Allocated to digitization will only help, but we are seeing, especially post the pandemic, a huge push towards digitization. And there's a unique opportunity for us in B2B to be at the center of this. But rather than me talk about it, I think this video Captures a lot of what I'm saying here better than I can. With that, can we play the video please on B2B?
German businesses are digitizing more than ever before. From small to big companies, from start ups to the public sector, From hotel to school, they all need a trusted partner who can offer them the whole spectrum of digital solutions. And that's exactly why Telecom is the partner for digitization. With its integrated digital ecosystem, Telecom offers the right Investing in public institutions and schools, we guarantee a fast and stable net with connectivity and hardware in socially relevant sectors. To benefit their needs, telecom values Partnership alongside the customer's vision.
With these digital solutions, Deutsche Telekom enables end to end digitization for all business customers, secure, simple And innovative.
Thank you. I hope that gives you some feel of The speed at which this is moving in Germany and how central we are to making this happen. Now especially post the IP migration with our ability to offer services like SD WAN, right? This does change the game. Now a bunch of factors for me Now convince me that this business is ready to accelerate from 0.7% growth to 2%.
Number 1 was the digitization flood that I just talked about. Number 2 for me is the fact that the headwinds have turned into tailwinds, certainly with IP migration and as we're seeing increasingly with corona. And last but not least, our go to market is really powerful now because we're able to take all the telecom services together and offer our customers to integrated services from one hand. So that is the story of why we believe in B2B Acceleration. Now having talked about the digitalization of our customers, I want to now talk about our own digitization.
Now, we will look to substantially accelerate digitization in the next 3 to 4 years. Now starting off with the front end, how do we think about digitalization at the front end? Now at the front end or customer facing, I think our strategy is actually really simple. It is bring together the best of digital with the best of the human touch. What does that mean?
It means using digital to eliminate As many routine transactions to eliminate as many faults proactively as possible. Tim already spoke about the 3,000 bots. We're putting in place now a tool called Magenta View, which gives you an overview of your entire relationship and is powered by AI. Tools like these help remove a large number of the routine inquiries, which then allows us to really invest in our people to solve those difficult problems, which need a customized solution, which needs someone to talk to you. Now, That said, the only way you can do that is incentivizing them right, right?
I often say telcos sometimes are a bit bizarre. They first cause you a problem And then they pay people to spend less time solving it for you, which is really what paying people based on average handle time really is, Right. Now with our people model through dramatic digitization, what we can do is really take home the A team of experts model that the U. S. Has designed and focus on solving customer issues, focus on incentivizing First time resolution, 1st contact resolution.
This combination of digitalizing the front end as well as combining that with people Where we need the most, we'll see a 60% first contact resolution, more than $200,000,000 in savings over the next 4 years And a growing customer satisfaction. That's sort of the front end story. But our view of digitalization is full stack. It's not just about the front end. The principles of digitalization apply across the entire stack.
Claudia will talk about that in more detail tomorrow, But it equally applies to the back end, it applies to our IT and it applies above all to our network through disaggregation, cloudification and automation. Let me just give you some quick sense of the way we think of the outcomes of this. Really strong outcomes on customer touch points, as I talked about earlier, App penetration, e sales share, digital share, very strong outcomes on the IT side in terms of a more agile, quick to react IT. And last but not least, at the heart of our business, cloudifying, automating, disaggregating our network. When you pull all of the digitalization stuff together, what's the payoff?
Pretty impressive in the next 4 years. We will take out €700,000,000 in indirect cost. Now a lot of that will come through directly through the digital tools. Some of it will be the knock on effect The nature of the organization, we will have a slimmer, smaller organization, but also some real big knock on indirect cost effects. We will give up about 300,000 square meters of real estate, 50% reduction in real estate because of this whole process.
So that's then we've now covered off the acceleration of the infrastructure build, how we fund that through accelerating revenue on B2B and B2C and through accelerating digitization. Last but not least is a subject quite close to my heart, Which is the place we occupy in German society. We are proud today of being an integral element of the German social fabric. Nothing shows this more than the way we reacted to the corona crisis. Things like 10,000 smartphones being given to old age homes, Things like specific packages for our B2B and SMB customers to enable them to move quickly to home working.
This lies at the center of what Deutsche Telekom Germany is. We believe we play a central role in society And we don't see that as an obligation. We see that as a privilege and something quite special to me. Just as in all the other areas, we're committing to Accelerate This as well. How do we do that?
Deep involvement in digital education and literacy, 7,000 schools to be covered through FTTH and digitized. Real commitment to the environment. We're already a 100% user of renewable energy. And again, Cloudera will talk in more detail about this, but we plan to push further on energy efficiency. And even the way we build networks, build networks with the community for the community, not for ourselves.
That combination of things we think is an integral part of who we are, a responsible employer, a responsible corporate citizen in Germany. That sort of covers all of the 5 big areas of acceleration. I'll move on now to the outcome of all of this, Hi. The combination of driving B2C growth from loyalty and households to being the chosen partner for the rising wave of digitization in B2B to driving digitization within our own company and having Built a solid foundation, which gives us tailwinds now enables us to accelerate EBITDA growth from the 1.9% you saw to the 2.5% to 3%. When you put together this accelerated EBITDA growth with real discipline around capital allocation and to management.
Some examples, as a result of IP migration, next year we will switch off our SDH platform. That will give us €50,000,000 savings in indirect costs. We are now retiring our 3 gs network. Mobile network, we have 6,000 sites that we will share in white spots across us and Telefonica and Vodafone. That plus all the CapEx efficiencies I've already talked about will result in, as Tim said earlier, a 50% growth in our return on capital employed.
So you have a business here, which is growing, creating great terminal value with 10,000,000 homes of fiber By 2024 and still creating value each step along the way, not just with ROCE greater than WACC, But with a ROCE that is growing and that truly is what acceleration means. Sum this up in terms of our mid term ambition, this is a repetition of a lot of the stuff we said. I'll highlight the €500,000,000 higher cash CapEx. That was exactly what we guided at the end of at the Q4 earnings call, 2.5% to 3% EBITDA growth, which I've talked about And 10,000,000 FTTH Homes Passed, 97 Percent 5 gs Coverage, 700,000,000 indirect cost removal. So all in all, a comprehensive Besleunigung for the German business.
Now, as we talk about acceleration and everything that happens with it. None of this is possible without really charging the motor of this company. 60,000 people who come to work every day at Telecom Deutschland need a purpose. They need a reason to accelerate. And that reason and that purpose is Kundenselfansmachen, turning our customers into fans.
That's the reason why we accelerate. Now what that means is not just a slogan. It's about us really putting our frontline first, the people who are out there serving our customers through all of the pandemic, the people who are out there day and night actually delivering for our customers, because we believe Only by putting our frontline first, can we put our customers first and only by doing this, can we make the transition not just to acceleration, But from a solid, well delivering incumbent to an accelerating unencumbered. And nothing captures this spirit more
Our energy on the customer and shifting the company's center of gravity to the front line. And that shift has already started. Whether in the service center, the field, the store or through our technicians on-site, our employees are in contact with our customers
Well, thank you, Srini, and that was really Firing. And we also feel inspired. We think we should turn investors into fans. So that's our next mission here or we're trying. But the other thing that we really like is Forspunkt deutschpuschleunigung, yes.
So I can see our I need to make an organization announcement. As you might have noticed, we are running over a little bit. And So we skipped the break and the subsequent sessions will move backwards a bit by 10, 15 minutes. Apologies for this, but I think it's important we also have a space for Q and A now on Germany. I know it's a Your business is dear to your heart.
And let me start with Simon. I can see you, Simon, from Barclays.
Hi, guys. Thanks for taking the question. So on wholesale, you've been able to negotiate these new wholesale contracts with The wholesalers have a very attractive more for more structure on pricing going forwards and as customers move to faster speeds. That means we're going to see wholesale revenue growth after a short term hit. But if we think about what's happened elsewhere in Europe, we've seen challenges Actively try and avoid this cost inflation that this brings by maybe moving to alternative network providers.
So I'm just wondering, Is there something in the contracts that gives you confidence that this won't happen? And how can you get comfortable that, say, if a wholesaler does get reasonable market share, They won't seek to get some help from, say, private money that's very interested in digital infrastructure because you yourself said, if you get good penetration in a certain area where you don't have Then you'd be more than happy to overbuild. So I'm just wondering how you think those moving parts play out and why you have a lot of confidence on wholesale going forward. Thank you.
Yes. So maybe just on with a so thanks for that question, Simon. So a couple of things. One, there are parts of the contract that we can't really talk about, But the overall construct does give us a fair degree of reassurance in terms of utilization of the network, And it's hard for me to go into more detail than that. But it does give us a fair degree of reassurance on the utilization of the network.
That said, will there be parts and geographies where some people will get some share on the wholesale business? Yes. But equally, there are large chunks of areas where we don't have share today. So there will be swap sets that land up happening as a result of the of effectively an infrastructure reset, right. But there's enough in those to ensure that there's a floor to the utilization Of our fiber network.
And I'm already treading into ground that's beyond which is hard to talk about.
Yes. Thank you, Svein. And It's for sure, we feel very good about these contracts and we went into a lot of detail as much as we possibly can, right at the earnings call, but it's and we are guiding today for flat wholesale access revenues.
Can you just explain that briefly? So Simon, the reason we're guiding for flat wholesale revenues despite the kind of more for more structure It's a well publicized fact that Vodafone is committed to a certain amount of migration of our network to achieve their cable synergies. So effectively volume goes down, price goes up. That's what creates stability. Okay.
Thanks, Simon. Next question is from Josh at Exane. Josh, good to see you.
Hi, guys. Thanks. I have two questions, please. The first is actually just going back to that very helpful quadrant on Slide 12 about the different fiber build areas. I understand the kind of cost of rollout and the potential returns in each of those areas may be different, but it'd be great to get a sense of which Should these areas you're going to prioritize most in the near term?
I mean, in particular, it sounds like this move to counteract cherry picking could be quite important when we think about The phasing of rollout in 2023 onwards. And then the second question is on this turning customers into fans strategy. So You've highlighted that moving to Convergys helps. But are there any particularly strong products in your portfolio and also particularly Challenge products, which you think you need to change the setup on. I think in the past, we've talked about the fact that TV might be A bit lagging a bit behind broadband growth.
Are there any actual changes to the product structure you're thinking about as you look to achieve this? Thanks. Good.
So let's start with the prioritization, right? Now on that slide, it also had the percentages of Germany in each place, right? So you have 55% in Quadrant 1, right? You then have 15%, 10%, 15, 10, 15, I think, in the rest. Now broadly speaking, our rollout will follow some of those patterns.
Now what have we announced so far? We've said we will build out 3,000,000 households in rural, Right. And that's a public commitment and that will fit into the right hand side quadrants. That will be a mixture of subsidies, But also, it will be counteracting cherry picking. So that's clearly one place.
And then because 55% of the population sits in Quadrant 1, You will see us build out there as well, right? So I think there will be slight differences in our percentage of build out Versus the percentage of population, but it's not going to be dramatically different because that gives us enough leeway to deal with the cherry picker issue. If you take the right hand side quadrant, yes, there's 15% of the population there, but it's really probably half of it, Which is attractive to build out without subsidy, which could be cherry picked. So you want to go there first, absolutely. And that we're completely committed to.
But that doesn't result in 50% of our money being spent there, just because of the way the map lands up working, if that makes sense. I love your second question on product structure. So firstly, on TV, it's actually a product that we really like and it's been going very well. As we look forward, one of the numbers I didn't put up there is our plan actually involves an increase in our 3P mix. So from about 25%, we will be looking to move that to 30%, 33%, which is more TV attach rate to our existing products.
So it's actually something we see accelerating in terms of where we are right now. Let me come back to your other question Product structures and where that plays out. Look, I think some of the issues with an incumbent tend to be when you have back book issues, right. And the most significant of those tend to be in B2B. I think what I really like about our portfolio right now is IP migration Washed out a lot of those effects, which means we can now start competing in some of those places, SD WAN migration, for example, Without this, a democracy sword of the back book necessarily hanging over us all the time.
So, my sense of where we are on product And what you should be expecting is a lot more focus on convergence and a lot more focus on the Magenta brand in consumer. I think we punch below our weight on the Magenta brand and consumer, and you will see a lot more focus on that. Does that help?
Thank you.
And that's mainly also relative to, let's say, the Kongstar brand or other. So it's not very Nestle, in Imperial List Statement. Next, we have Ulrich. I think, Ulrich, we have you on the phone here.
That's right. Thanks very much.
Oh, cool. Okay. Go for it.
Appreciate it. Thank you. I have two questions. Second one very short. The first one is The 4% minimum for the broadband revenue growth looks maybe a little bit conservative Considering the MDU opportunity where the changes to the telecoms law means maybe a quarter of households, your competitive situation improves, Is that essentially because you think there's a case for not rocking the boat too much to sort of not disrupt market structure?
What's the background there? My second question is about the 7.5% return hurdle for the project that you mentioned. Is that an all in number after the loss of the legacy revenues that necessarily comes when you connect the customer to Fibro? Or how is that calculated? Because it looks fairly high given that you're essentially replacing infrastructure From one where you have paying customers already.
Thank you.
Good. So I enjoy being told that 4% is conservative. Look, I say it's we are growing at 6.5 right now. Beyond a point, I am very optimistic about the broadband business. Do I on rocking the boat on market structure, look, I don't like
Welcome. Talking about on market structure in
general, right? Now we will gain share where we land up building. But even on the MDUs, in the vast majority of MDUs between wholesale and retail, We have 60% of the customers in an MDU typically are ours. So when I build into an MDU, I'm often building from my own base rather than to necessarily gain share. We will land up gaining share in some places.
There are lots of places where there's performance issues with competition, And we will land up gaining share. But the 4% is, like I said, given where we are right now, I think we've benefited from massively from vectoring. I think there's been some flight to quality as a result of corona. So we think it's a sensible number to guide for. And from a market share perspective and a net add share perspective, I think the above 40% still continues to be where we are, because we think that's the right thing from a market structure perspective.
I think the biggest thing that the MDU access lands up giving us is it frees up consumer choice on TV, but also importantly, prevents people from blocking our entry with fiber, right? So that's the way I think of it. On the fiber IRR, look, we can do a separate deeper conversation on the specifics of the model. But let me just put some of the questions of fiber economics into context, right? Because I tend to think of fiber economics in the broader context of us running A business, a lot of which is valuation is based on the terminal value.
Now you think of yourself today In a decision where you don't roll out fiber, 4 years from now, you have largely a copper network you have a business where ROCE is greater than WACC. You think of the alternative, we grow ROCE greater than WACC, so we create value at each point. And we have a business with 10,000,000 fiber homes, which clearly has significantly higher exit trajectory as well as terminal value. And happy to kind of walk you through the mechanics of how we calculate the project IRR and what drives the hurdle return, What's included? How much of it is a do versus don't do case, etcetera?
And we can take that offline and talk through it in more detail.
Thanks, Friedi. So that brings us to the next question and that will be from Emmet. Emmet. Oh, there he is. Wonderful.
Good to see you.
Yes. Good to see you. Yes. Good to see you.
He puts on a white
shirt, really cool. Look very smart.
Well, thank you very much. Thank you. As Srini was trying to speak or was speaking some German, I'll throw a bit of German in too. So I have a Seifried Fragen. Two questions, please.
And the first question is on your broadband market share and the outlook for that. And if I rewind the clock back to, we say, the Capital Markets Day in 2012, I think that's when you announced your initial VDSL investment. And clearly, that was a let's be honest, it was quite a defensive move because you were losing a lot of broadband market share at the time to cable. Now if you fast forward to this year, your broadband speeds are now quite high. You've got a vectoring available to 80% of the population.
It feels like A little bit more of an offensive move. So with that in mind, is it fair to say that you could look at winning market share Off cable, off the wholesalers as I think the motivation for moving to fiber is perhaps a little bit different this time. And then my second question was on the ARPU uplift as you move Customers on to fiber as well. Can you say a few words about your experience as you move customers on to VDSL initially
And on
to vectoring later and what the read across is for retail RPUs as we
roll out fiber. Thank you.
Very good. Look, let's deal with the first one. I agree with you. Fiber is a more aggressive move in the sense of not purely because of market share, But in the sense of I could sit here and make the argument that we don't need to do it just now. Now, I believe that's a Defensive incumbent argument.
I fundamentally disagree with that argument, because when I work at I think of this differently. I come back from Where customers are going to be, right? The upgrade cycle, like I talked about earlier, the two principles of the upgrade cycle, Everyone tries to stay with their infrastructure until they need to move looking for higher speed. 2nd, people make one upgrade at a time in terms of speed cycles. Now you could look here and say 80% of our customers, right, have at least 1 or 2 upgrade cycles left.
Let's milk that and then go on, Right. My perspective on that tends to be different, which is let's get the 80% of them done in the next 2 years and get ready then for the next cycle of investment, Wish will give us another round of ARPU upgrades and let's fund that by being by driving our efficiencies really hard. And by the way, that upgrade cycle will help fund itself as well. So I agree with you on the it is not the classic incumbent way of thinking about it, Let me just milk the asset as much as you can for now. But it's the market share gain, it'll happen when it happens.
The but the bigger price here is the growth within our own base. And for sure, we will land up gaining share in some areas, right? But we also need to make sure that it's coherent with the right structure. The ARPU uplift, great question. Look, there's A €5 ARPU uplift typically with each speed up that you move from, right?
What we have seen In the vectoring cycle is order of magnitude of 5% ARPU growth, annualized about 2.5%, Right. Now, this is where you kind of get into the question of is 4% conservative or not, etcetera, etcetera. I would expect us to see at least the same, because what you will land up having is more of a mix of the higher speeds. I mean, here's how a typical pricing works, right? It's €5 an upgrade up to about €2.50 Mbps and then it tends to be more like €10 an upgrade, Because the curve gets sharper.
So I'm hopeful of seeing an acceleration in that, but I will plan on seeing the 2.5.
Good. So I think we take 2 more questions now. And the first one is from George at Citi. George, they're here. Wonderful.
Hi, guys, and thank you for taking my questions. One is a follow-up on some of the comments you've just made around pricing. It's very encouraging to see that your significant fiber investments have been given some returns as part of the wholesale agreements. But I'm guessing some of the other resellers may want to raise prices over time in order to pass through some of this inflation to the customers. So I just want to hear from your side what do you plan to do in order to maybe give them the room to do that In order to raise ARPUs, not just when migrations happen, but maybe in a bit more active way yourselves.
And then the second question is more around capital allocation outside of fiber. So fiber is slow returns but low depreciation. We can understand the mix in when you benchmark with returns on carbon unemployed. In the previous presentation, Tim also mentioned about Cloud native networks, IT. And some of these things are easier to do when you are greenfield Now when you have a huge established base and also a legacy of technologies, well, I'd be interested to hear from your perspective What are the challenges in your view?
And does that mean you depreciate some of your existing assets earlier in order to move into cloud native Solutions before competition.
So let me start with the pricing piece. Look, I think 2, 3 separate perspectives or reactions to it. I tend to think of speed upgrade driven ARPU increases As healthy and there are some there's a real danger in fixed line, right, Where sometimes you are the only supplier in a region and you view that as permission, sometimes like cable in parts of Eastern Europe to have an annual round of price increases. I think that can get dangerous from a pure customer experience perspective, but also from a regulatory perspective. So I have a bias towards growing ARPUs through as people upgrade, right?
The way I think about Room and I think a healthy market structure is always worth keeping an eye on. And one of the things I keep a really close eye on Is how is our net add share evolving? Are we making sure that we're at the right mix in terms of net add share? And that's where I think your really good question on how do you make sure you give people room plays in, because they can Ultimately, their pricing is their own call. I look at titrating my mix in terms of what is my net add share and I do I think That's appropriate from a healthy market structure perspective.
On capital allocation and especially on new technologies, Claudia will talk a lot about it. Look, I think firstly on the IT side, I think the view that somehow incumbents have a huge disadvantage It's increasingly changing, right? As you get into a world where you're able to introduce for starters An intermediate layer, which is API based, you're able to start with overcoming a lot of your disadvantages. And then there's so much cloud native IT available today that you can piece by piece start taking apart your old DSS and OSS to do a 3 year migration. Now I think the old world of if you are an incumbent, all you have to do is a big bang IT project That costs 3 times as much as you thought and takes 3 times longer.
I think we've proven now in several countries that that's a myth. And in Germany as well, we're making the same journey, right? I think your network question, I think there it is harder to Swap it out overnight as an incumbent. But I also think the components of a network cost structure Our more complex and there are several incumbent advantages in it. The amount of spectrum you have, A huge advantage, the amount of towers you have fiberized.
Yes, it's easier as a new player to come in and establish a cloud native core, But the core is a small proportion of the total cost structure, right? And scaling is really hard. I mean, just to give you an example, Let's say you have a player in Germany who is building a cloud native infrastructure. They can build that, but it will take them 10, 15 years to get to it will take them 10 years to get to 50% population coverage. And that scale itself does have limitations purely because of the availability of sites, the antenna available on rooftops, etcetera, etcetera.
All of that does impact their ability to really attack. For us, on the other hand, as an incumbent, We are in a place where if we started pushing on Oran, which we are doing now and we're looking at lots of options of really scaling Oran. In 4 to 5 years, we could have a significant part of our network disaggregated and we will always have our 30 odd 1,000 sites, Which gives us a scale advantage. So I think there are puts and takes on it.
Excellent. And of course, More on this from Claudio tomorrow. And last question, please, is from James. James, good to see you. Go for
it.
Yes. Hi, Hannes. Hi, Srini. So two questions from me, please, first. The first one, I'd just be interested to hear a bit more about your targets around B2B growth.
And I'm thinking about Specifically in the light of what Vodafone said yesterday, they specifically were talking about increasing Their investment in B2B and seeing considerably higher growth rates may be heading towards mid single digit Revenue growth, I mean, is this an opportunity you see where you might actually be able to increase investment more in Germany And potentially drive higher growth than you're targeting at the moment? Or do you see something specific about Germany that maybe the B2B growth rates In this market, it's going to be a little bit lower. And the second question I had, please, was around the Network Economics, you were talking about in some of these joint fiber projects, and we'd just love to hear a little bit more about how that works. So your projects, for example, with Net Cologne or EWE, as you're migrating customers Potentially over onto those shared networks, how are you incentivized to do that if you're moving from 100% ownership of a network to a network that is joint owned. We'd just love to hear a bit more about how you see the economic payback from those models.
Thank you.
Good. So let's split 3 different types of models, James. Sorry, I'll deal with your second question first. 3 different types And so that's why I said this is my last resort, right. It's I do lose margin in the process of moving to a whole buy, Right.
That's now we have hold by today in FTTC. We will have some hold by tomorrow in FTTH, but that's not going to be the center of my economic model. AV Atell, very different case. That's one of the bottom left quadrants, right, where we didn't have FTTC, Reasonably low shares, there's a lot of upside in creating that model. The 3rd different model is kind of the KPN APG model, right, which is if we get into a model with an investor.
Now there, the way we maintain as close to owner economics as possible Is by trying to figure out ways in which we can effectively capture a lot of the value between the passive and the active layer, right? Because when you look at when you de average a network, right, ideally, when I buy some someone else, I want to buy passive Or if I'm buying active, I want to be the provider of active of the active services that go with it, because I have scale on active, Right. So that's how I think about making sure I get close to owner economics and gives me incentive to migrate Or in the other in the AVA Tel case, there's pure upside. And NetColonial, hold buy is hold buy. I will do it when I have to.
But it's not my going in choice. And I would ideally prefer to do it when I do it with community based players Like AVA Tell, rather than pure Overbuilders and Cherry Pickers. So to your first question, B2B growth, look, I think there is upside. I think the place I don't think this is a question of investment in our case, because we're making the investment in fiber and networks and infrastructure. I think the real question here is for us, how do we make sure that we develop cutting edge B2B product, Right.
And cutting edge B2B product, both in terms of software defined networks, but also things I mean, Tim's point earlier, Being able to manage a disparate diverse network and being able to control and automate it, right? That plus areas like cloud communication, right? So I don't think this is network investment. I think this is product investment. We do foresee a fair amount of that.
Is there upside to the 2%? Yes, I'd love for there to be. Am I happy to say right now there is we'll see. I mean, I think You can bet too much on things like the EU Recovery Fund. I saw a lot of press about that yesterday.
If those tailwinds Blue in Germany as well, then we will benefit it from it more than anyone else.
Excellent. Thank you so much, Srini. And that brings us to the end of this Q and A session. And of course, we will be talking to you a lot more in the next to weeks, months and years on many of these subjects. So apologies again for taking your time Taking your break away and we come to the next session straight away.
And the next session is on Europe and Our next session will be presented by Dominique Leroy. She doesn't need much intro in this audience here. We are delighted to have her in our management team. At our last CMD, we presented our turnaround plan for the European segment. Now 3 years on, Europe has become one of our best performing assets, Europe's best performing telcos.
And we have the same challenge as in Germany, how to accelerate, how to make something good even better. This is a noble challenge, and who would be
Thank you, Annes, and Good afternoon, everybody. I'm really happy to be here in my new capacity of Board Member Europe. And I'm sure you remember, 3 years ago, Srini was standing here and was talking about turning around Europe. I can tell you that today, I'm very proud to say that The turnaround has been done and that we are today a leading large scale European telco and on top of it a very fast growing European telco. So the whole challenge we have today is how do we write the next chapter?
How do we accelerate that growth? And what we want to do is really go to long term sustainable growth by focusing on customer centricity and on digitalization. We have opportunity in the B2C area. We want to scale fiber. We want to upsell customers in fixed mobile convergence, Grow revenue per households.
We want to improve customer service even further. We want to grow in B2B. There are several markets where on B2B you have still lots of opportunity And we will grasp that because we will also converge telco and ICT product in the European region. Next to that, we want to people are very important to me. We want to scale agile organization, customer centric mindset.
I will talk about network, how we will scale fiber, how we will bring 5 gs. And a very important element for us as well is How do we scale digitization and how where do we go from where we are to the next step in digitization? One element, which for me is a very important one and I would probably not have said that 3 years ago. I think today the telecom Operators that will be very successful going forwards are the ones that are multi country. We are able with digitization coming up, With cloudification coming up to really scale across the countries and that will give us a very strong advantage versus local players, We will be able to get best practice from one country to another, scale or digital infrastructure, Scale cloudification and that will give us way faster speed to market than competitors.
A last element which I will come upon is very much how Europe will bring a fair share and a fair value to DT Equity. We have been growing. We will continue to grow and accelerate growth. We have a very strong cash conversion And we want to accelerate that as well. And on top of it, you will see that OROSI is a quite nice evolution as well.
So let's start with the review over the last 4 years. If you look at that, I mean, these are the figures of 2020. We are €11,000,000,000 turnover European telco if you look at the region as a stand alone region. We deliver almost €4,000,000,000 EBITDA close to €2,000,000,000 cash. If you take those figures in a standalone European landscape, we would be Around the 7th biggest telco in Europe, far ahead of Iliad, of KPN, of Telia.
But on top of it, we are one of the fastest growing telco. If you see some figures here, even with 1 year of COVID in the 4 years and COVID has impacted quite a lot the European segment because you have a lot of countries like Greece, Croatia That have had quite a loss of revenue and profit in terms of roaming and visitor. But despite that, We have been able to get a 2.3% EBITDA growth over the period and a 3.9% cash growth over the period. So I think a tremendous Presentation of the EU segment and somewhere I think something is not always well known or known enough in the community and I think we should really reconsider Europe as a key engine for growth within DT. If we look at the market, because then sometimes you could say the European markets are not very healthy markets, I would just say it's the opposite.
If you look at our market, we have quite a lot of growth potential. If you look at the expected consumer spend on telco market, It's around 3.5% going forward, a very strong potential growth. If you look at the structure of our market, Most of our markets are 3 MNOs markets where we can indeed further drive growth. Only 2 of them are 4 MNOs, which is Poland and Romania. We also today very much more than before, we have regulation and we have government They are really looking at how can we faster digitalize those countries.
If you look at the DAISY Index in Europe, we are currently In the countries we are in relatively below the median with the exception of Austria. So we see that quite a lot of Political will is there to further drive infrastructure rollout, to further drive digitization and we will get around €20,000,000,000 of EU funds that Welcome into the DTEU footprint. So I think those all those elements should give you confidence that the EU segment is growing, is big and has quite a lot of growth potential going forward. But let's look at what we have achieved over the last 3 years. You see here 13 quarters of growth in a row, growth coming from around 1 third net margin growth, 2 thirds reduction of cost.
I will go 1 by 1 through those parameters. If we look at the revenue, it is both value and volume, Very important and you see the acceleration over the last year. The value has been achieved by upselling customer on the mobile, but also I mean pushing the fixed mobile convergence and the volume you see here a few figures, €2,500,000 new extra mobile contract customer And close to 1,000,000 broadband customer. On the cost side, I think it's quite impressive what has been done on the cost side. We have been able to reduce IDC by €320,000,000 so a 30% IDC percentage on revenue, Which I think is close to best in class, but you will see we will not stop there.
We will go further. We have done that through Some reduction of people, quite a lot, 6,000 people less in 2020 versus 2017, But that has been very much by downsizing central function, outsourcing some non core activity and a bit of digitization, but that's Where I think we can still grow further if we look at the future. Another thing we have been doing and Tim has highlighted it, We have been able to put one new home pass in fiber in 2020. It was the 1st year that we have been able to get to this number, but our intention is really to go forward with that number. And you see here some figures, 22% coverage, which is Quite significant, but what's for me is even more important, it's not just home passed, it is homes connected.
The homes connected, 30% utilization of our network, 1,700,000 homes connected on fiber already In our footprint. So if you look at then all the promise that were done back in 2018, I'm very proud to say that we have delivered. All measures are green, being measures on the customer side, the consumer side, the business side and the financials. I have highlighted most of them, so I think we can really be proud of what has been achieved in Europe. So let's look together now how we move forward from here.
Strategy 20 onetwenty 24. A few elements and Janes highlighted to it. It is really moving from good to grades. And we want to do that by a few elements: keeping a fast growing telco With a customer centric and digital focus, winning the hearts and minds of customer, even going further than just a good customer service, It is winning hearts and minds. Truly converge, fixed mobile convergence in every market we are in, Drive further digital as we have a very strong basis change the organization to an even more lean and agile organization And last but not least, move our brand from a rather functional brand into a territory where I would call it love brands, but I will come on that Later.
We'll do that around 6 levers for growth. I will not go in details on this one, but immediately jump into the B2C See elements where we are today, I think very strong growth in number of subscribers on all our products and a quite strong FMC, 51 percent of our broadband base is already fixed mobile convergence. If we look then at the future, I mean, what we want to do is further drive fixed mobile convergence value, but also capture underserved segments. So the fiber build out we will do, the 1,000,000 additional fiber a year will really help us to boost broadband penetration. From there, the strategy is to really cross sell and upsell, get several multi mobile customer onto our broadband, upsell on TV, but also upsell potentially on new services coming down the line.
The 2nd bucket for growth in the B2C is very much capturing all the segments. So we are running segmentation study in all our footprint. And from there, we are really looking how can we capture also the young generation, be relevant with propositions for the For the young generation, but also look very relevant to either reshape or introduce a second brand Where we can really tap into the Smart Shopper segment. That will help us to drive new customers and then being able to upsell them to the Magenta NT proposition. Customer centricity, best customer experience, our very second pillar.
We have a lot of customers. We want that those customers are really happy and loyal customers. We want to reduce churn further than we do today. For that, we will really drive a customer centric organization. We will also make sure that we implement a tool which is called Medallia in all the footprint.
It will Rolled out this year. From there, we will really get a lot of information on every interaction we have with our customers. From those knowledge, we will be able to identify what are the pain points and we will then be able to really reallocate Resources and CapEx to make sure that we tackle the pain points that are really hindering the most our customer experience. And last but not least, we really want to implement the customer journey mentality in the organization and process in the organization By really being end to end, really looking at end to end experience for customer, doing that across all the channels, knowing that, of course, we want to push more digital channel, but we will making sure that both digital and human touch Our centric to our customer interaction. I touch upon it in the intro, the LOVE brand.
So the love brand for me is really how can we with our tea brand convey digital optimism to the countries? How can we turn employees and customers into our brand ambassador? And also How can we bring the brand in a much more emotional territory where people are really attracted by the brand And therefore, we will be able to feature in a much bigger pool of customer that would come to Magenta and Tea brands. We will That's all the major pillar of growth on the B2C that should translate in those metrics. So we want to further grow significantly Our €6,600,000,000 consumer business, we want at least to have net adds share in line with our fair And to be honest in countries where we are not significantly dominant or incumbent, we want to even grow These net adds, we want everywhere to grow value market share and we want to deliver a 1% to 2% net margin growth.
You also see on the right side everything our targets on fixed mobile convergence. We want to grow by around 10% a year to at least 4,000,000 Fixed mobile convergence, driving value and driving the RGU per households. Let's go to B2B. In B2B, we have already realized quite some good growth. ICT is within Europe, so that's probably not always known to investor that the full T system is in the Natco in the EU Natco.
So we go to customer with a full package of connectivities and digital solution. We have been able to grow our ICT product by around 7% a year to more than €1,000,000,000 and we have done that with a strong focus on profitable growth. So you see there as well our ability to grow net margin in the B2B by around 2% over the last 3 years. Next to that, there is always a very important element in terms of competence, in terms of skills. So we are organizing ourselves to have competence center in the B2B area to really drive the knowledge And last but not least, I think we have done quite a lot of good work on the IoT And on the Smart City, where we are rolling out Smart City in several of our countries.
If we look forward, I mean, we want to continue The growth in the B2B, focusing very much on the different segments and accompanying our customers into their own Digitization. So we want to become the partner of digitization in the B2B area. If you look at the public sector, It's all about driving further digitization of public sector, also using EU funds because a lot of countries are Running new projects based on those funds to digitalize faster the administration and the country, But we also want to bring quite a lot of value in the enterprise segment. We will then focus on smart connectivity, SD WAN, Unified communication collaboration, but also tapping into the hybrid cloud space and bringing security into our portfolio. And on the small and medium businesses, I think there is also a very different way Of driving business there, it will be very much through Magenta bundles where we bring connectivity and digital solution in packages to small and medium company with Small and medium company with service on top and therefore scale their ability to tap into the digital domain for their business to become more successful.
If we look how that translates in figures, we want to add a €300,000,000 Additional revenue into the B2B segment. I think there is a very strong opportunity still in 3 countries and those countries are the biggest In terms of footprint in B2B, I mean Austria, Czech and Poland and these are 3 countries where we are still a bit small. So there is still a big Growth potential there. And as I already said, we want to further grow with a healthy margin. So our objective is to deliver 2%
to net margin in B2B as well.
If we move to people, I think people is very important. I already said it. It's all about Attracting the right talent, having international and diverse scope, having organization that are lean and agile And very much having a culture which is very customer centric and you see a few elements there. We really want to become Top employers in the country we are in. We are also big players in most of the country we are in.
So we also want to really take Ownership for our impact on society and bring positive impact on society. We want to do that on digital inclusion. We have a lot of programs running in the countries to see how we can bring digital and STEM to the use, But also how we can include more the elderly people in the digital space. We also have a lot of program on environment Alongside the whole DT objective by reducing our CO2, reducing or increasing our energy efficiency And making sure we also have more recycling, less waste. So quite a strong program on those elements as well.
Let me come to network because I think network is a very important element. We have already done quite a bit on network. We have currently 98% coverage On LTE, we have already 22% on fiber, but we want to go further. If we see here, We want to become the undisputed fiber leader in our footprint. We want to do that by rolling out fiber in several countries.
And why do we do that? Because we think fiber is a very has very good economics in our country. We have been able to roll out Fiber in 2020 for less than €400 per home passed. So that gives us quite good TCO and quite good payback On fiber, so our objective is to really further roll out fiber. We will complement that with Partnership.
You have countries where there is already quite a lot of fiber, for instance, like Poland. That We will not try to overbuild with fiber. I think this would not be very sensitive and sensible to do that. We will do a whole buy with people that have already deployed fiber. So we will have a hybrid model about own fiber rollout, But also partnering where it makes sense.
Our objective is to have 40% coverage of fiber. We have An objective of €10,000,000 on fiber, we will complement that by €4,000,000 to €5,000,000 fiber that will buy in whole buy deals. Our utilization rate will even increase to 33%, where we will then have at least 3,000,000 households connected to fiber. So quite a strong program on the fiber. On the mobile, we are very often mobile leader in the country we are in.
We want to stay mobile leader. So we will further roll out 5 gs. We have already secured spectrum in a lot of our countries. So most of the country we have been able to buy 5 gs spectrum. We will deploy 5 gs Along the renewal cycle of our RAN and our radio units, we will make sure that We stay ahead of competition.
We have an objective of 75% coverage for 5 gs, but we will also make sure that We retire the 3 gs to increase capacity for 4th and 5 gs, but we also very much focus on monetization of fiber We have monetization of 5 gs, excuse me. We will do that by putting the 5 gs where there is capacity needs. We will do that where we'll put 5 gs in some rural area where we'll be able to bring fixed mobile substitutions or fixed wireless access to customers, but we will also monetize 5 gs in the B2B area with campus network with further scaling IoT. The one of the very last but strong pillars of growth is everything around digital. I mean, we have been able over the past year to really build an impressive digital factory.
And I can say it because I tried to build that in my For my job, I can tell you I have been very much impressed by what has been built in the EU segment in terms of architecture. We have a harmonized API layer where we can connect with all the countries. So serving 10 countries And hopefully quickly 11 countries and even 12 countries when the Netherlands and Germany will try to move into the same platform. On top of that, we have really been able to build new type of application, new type of platform, Which are state of the art and where we build them once and we expose them to all the countries. But instead Speaking quite long here in front of you on that chapter, I propose we just watch the video and see together what has been done and how we want
Welcome. We took this opportunity to leverage our multi country strategy through a centrally developed experience ecosystem, 1xp Customers are served with over 1,300,000,000 banner impressions that provide personalized recommendations. So far, we have processed over €1,200,000,000 in payments on our highly rated and trusted platforms, where we enjoy a 20% higher NPS. With this experience ecosystem, we improved time to market, simplified our systems while providing our Welcome. Let us walk through some of the core pillars of our 1xT The ecosystem.
One app, now used by over 60% of our customers every month, Enables business and private customers to do everything from adding or making changes to their services, paying their bills, Prolonging their contracts, monitoring their data usage to accessing parental controls for their routers. Our television service provides best in class hardware with an emotionally engaging design on a cloud TV platform, Providing our customers with a seamless content discovery and integration. Our broadband utilizes the RDK framework To deliver the best Internet experience with Wi Fi 6, mesh extenders, hyper security and Customer journeys. We are now reimagining our services from basic and reactive to predictive and proactive, while setting the foundations to By the seamless home experience and even go beyond the core, our experience ecosystem will allow us to connect with our customers in a unique and
So I think quite a strong video that really explain you what we have done, but also what Platforms we have to build the future. So let me go quickly through some of the elements. The first one was everything around digital telco. Yousseen is the one app. It's how you manage your products, your contract, how you do payments.
But from there, you can imagine To build a lot more services in there and that's really a route that we'll be looking at. The second pillar was everything around broadband. We have one firmware for all the countries. So it means that we can get quite some advantage in procurement. On top of it, we have the RDK layer, Which enable us to build a lot of services on top of that.
You've seen some of them, parental control, guest Wi Fi, But from there, you can imagine that you can build a lot of different home solutions on that platform. If we look at TV, the same. One firmware for Europe building on the Android IPTV platform. And from there, You are able to really get one of the best UI aggregated content, voice, search Engine which are harmonized and where we can really offer all our customer state of the art content viewing. And the last bit is also a very important one.
All these new digital platform have been built With one data lake where we are able to store a lot of data from the way our Systems are working with our customers. From there, we are able through data analytics, through AI to really see what our potential problem and we can do predictive maintenance, predictive action So that we are really increasing the satisfaction of the customer because we avoid a lot of thought, but on top of that, It's a way to drastically reduce the cost and that's what you see as well here on the slide that our ambition going forward is to further decrease cost On the call, on the truck rolls, increase the number of transaction in the app And also have a first time right provisioning above 95%. These are all elements that are now possible, Thanks to the digital layer and in 10 countries in one go, which is quite amazing. Last but not least, we can try to do the same in now the network piece. I mean, we said already a few times.
I say it again. Claudia will come on that A bit more in details tomorrow, but we are able to further modernize our IT structure and our network. We want to simplify the way we work. We want to simplify our legacy, but we also want to simplify further our portfolio And our business rules to be able to automate more and also get some more benefits. And the same is true on cloud.
The more we will put on cloud, the more we will be able to harmonize and to automate. This should bring us to around 42% workload in the cloud by 2024, Another €300,000,000 reduction in costs and other elements like 4 of our Natco that will already be on 5 gs Standalone by 2024. A last topic I wanted to highlight with you is everything which is about capital allocation There has been quite a lot of work that has been done to strengthen our portfolio. We have gone out of several geography. You see here Albania has still been done and we are in the process of closing the deal with Orange to sell our fixed business in Romania.
That has enabled us to reinforce ourselves in other countries where we needed more capital. The first one which is a very important one is the merge we have done with UPC in Austria. Through that we have been able to bring our EBITDA margin from 34% to above 40%, thanks to a lot of synergies both in cost and in revenue. In Poland, as I said, we have been able to sign holdbuy deals mainly with Orange, but also with several Small player where we now have access to more than 4,000,000 fiber households and as from beginning of this year, we are really accelerating the fixed mobile conversion strategy into the country. And you probably have seen that in the Q1, we have already been able to have several thousands of new FMC customers in the country.
And last but not least, Czech will be a bit of a hybrid model. We will roll out Fiber ourselves, we have done some small M and A, but we will also do partnership deal because in Czech, there is not so much fiber in the ground. We still need to build it, But we will build it together with some partner like the agreement we have done with Cetin to exchange some fiber build out, which give us Further access to fiber going forward. All that very disciplined capital allocation and capital management has enabled us to Significantly increase our return on capital employed. You see here 3 basis points extra on the ROCE between 2017 2020.
If we look forward, I really believe that we can still further improve ROCE, further decrease cost and further grow, Mainly because we have a lot of synergies. I come back to what I say in the beginning. I really believe in the power of multi country synergies In the new era we are entering, we need of course a culture that allows that. We have built a next chapter strategy Together with the country and there is a strong willingness to go there, we see that we can have competence center, which Serve the whole region. We have, for instance, 300 people in our digital lab in India helping us drive the digitization.
We have this data lake where we have common data analytics AI model Let's serve the whole region. We are able to develop products, develop capability once. We rolled it out to countries. We are fostering today a lot of exchanges of best practice within the country. We deploy playbook whereby we do it in one country and then we see how we can have repeatable models in other country.
I think all that Should really change a bit the game going forwards and really enable Telco to drive more synergy, more speeds to market, more cost reduction So that's then my last slides before we come to the ambition level. I think I hope at least I've been able to convince you that Europe is probably a bit an unknown or under evaluated It's jewel within the DT footprint that we are strongly growing, that we are strong in execution, We are growing in customer. We are very strong in cost reduction. We have a highly digital infrastructure we can leverage. We have Strengthen our portfolio, we are investing a lot into fiber.
We are investing in 5 gs. We have secured the spectrum in most of the country at very good conditions. We still have a few countries to go, But we also think that we will be able to get spectrum at very decent price. So this all enable us To continue to grow, we have 13 quarters of growth behind. We want to further grow and we commit to a higher figure than on the last CMD, we want to have an EBITDA growth between 1.5% 2.5%.
We have a very strong cash generation and I think that's very powerful That we will even increase going forward to 57% of EBITDA. With a stable CapEx, it will give us a cash grow of around 4% to 6%, so quite a significant number. And for the first time this year in 2021, We will have a return on capital employed, which will be superior of the weighted average cost of capital of the region And we will further grow into ROCE going forward. So I think a quite strong region, a quite strong segment that have Proven to be able to do the turnaround, but I'm very convinced we will be able to further deliver growth and deliver value for DT. If you look at our commitment, but I think I've been through most of them during the presentation, we have strong commitments In terms of customer centricity, in terms of network, we have strong commitment into financials.
We want to have revenue growth above 1%. We want to have EBITDA growth between 1.5% 2.5%. We will further reduce IDC by €300,000,000 Our cash CapEx will be stable even though we want to continue to grow fiber and 5 gs. We will reprioritize the CapEx and we have a ROCE that will be Higher than the what. So this is my story for Europe.
I hope that I've been able to convince you about the power And the growth ambition of Europe and I was very happy to be able to bring that story to you. Thank you.
Great. Thank you, Dominik. I think Europe is just a fascinating story really. And when I think about it and If we really look at it in isolation, it really strikes me as one of Europe's most attractive telecoms operators. Thijs, and the level of digitization, the level of network penetration with fiber and the growth.
And so I think that a lot of it is really it all stacks up really. And with that, we come to Q and A. We start with George, I can see you. George, the man from Greece or rather the little island next to it, okay. So George, can we have your question?
Perfect. Thank you. I have two questions maybe. The first one is around Portfolio Optimization. And obviously, you are now in the process of exiting the fixed line in Romania, but you still have a mobile operation that's a bit Okay.
Well, starting from your business is maybe Poland. The returns are not as good as some other countries. And I think you have Maybe with the vendor changes that may come in that market. So if you can run us through how you're thinking about Are there actions you can take around returns in some of these markets and where your focus is in terms of optimization? And then my second question is on the European Recovery Fund.
I'm guessing for all of these countries, this could be a major event. If you could perhaps give us an idea of the scale. Also, where you think you are well placed to Win some of these projects and actually benefit from that. And then finally, if we can get an idea of what the bottom line impact is because It's hard for us to know if these digitalization projects are high cash flow projects for Telco Or whether a lot of evidence have been lower gross margin revenue flows. Thank you.
Okay. So thank you, Georgios for your questions. So I think yes, Romania, we are exiting the fixed business. We are selling it to Orange. We will keep the mobile business.
I think we have proven certainly in the Netherlands that we are able to grow and to manage an attacker position on the mobile segment. So For the time being, when the closing will be done, we are currently preparing a plan to really see how we And further scale the mobile and have a position which will more be an attacker position in the Romanian market, but that's Currently where we are in Romania. Concerning Poland, I think Poland we have a strong position. I mean we could Some people say we are the number 4 on the market, but we are the number 4 with 20%. So it means everybody is relatively close to each other.
I think what we are currently missing in Poland is indeed this fixed mobile convergence opportunity, but we are really building it. We have now The whole buy deal that has been finalized with several partner, we are starting to have communications on the market to really try to Scale it. So I think Poland is a country which for me is still a very great opportunity where we can further grow and it will be one of the growth Engine going forwards in the region where we want to, of course, keep an increase of mobile Positioning, but also complemented with a strong FMC positioning. Concerning operators and Supplier, this is something we need to discuss when there will be the auction will come and then when the government will decide about their cyber So I think it's too early to give any indication on supplier in the country. So your second question I think was on the European recovery funds.
I think there it's a big opportunity. And as Srini said, we don't want to oversell it Because the funds are there, but in every country, you have now we are now going through a process where we have to apply for some funds. I think Greece is probably one of the countries where it's most advanced. So we will definitely use some of the funds To build infrastructure, to further build fiber in more remote area that's currently ongoing, but we are So certainly in Greece looking at using that and not only in Greece in the B2B area where we have strong position back in Hungary, back in Slovakia, Greece, even Croatia, these are all countries where we are former incumbent or B2B position is quite substantial. And when you talk about digitization, there is quite a lot of opportunity to partner with public sector and further drive Digitization, so that's certainly one of our key elements in growing in the B2B area next to the 3 countries I have highlighted where I think we can Still grow even in the end a lot in the enterprise market because we are subscaled.
Your last one is The bottom line impact on the digitization project. It's difficult to say. What I would say is that probably 2 thirds Of the IDC savings will come from digitization and waste reduction. So it's quite significant. We are looking at €300,000,000 IDC reduction going forwards.
And ballpark, I think 2 thirds of that reduction Shukam from digitization. But for me, digitization is not only a tool to reduce costs, It's also very much a tool to enhance customers' experience. And what that's great about digitization Because you really can do 2 things at the same time. You improve your customer experience and you decrease costs by decreasing waste. And I think that's really what we want to do going forward with our digitization opportunity.
Great. Well, thank you, Dominic. And the next question is from Charlotte. Hello, Charlotte. Good to see you.
Hi. My question is around competitive dynamics and competitive intensity. Would you provide some more color on the markets where you see competitive intensity Increasing or decreasing? I suppose it builds on the first part of George's question as well. Thank you.
Yeah. No, I think as I put it forward, we have most of our markets are 3 M and Os markets. So where you have, of course, quite high Competitive intensity in all markets. I think you also have a lot of markets where the ARPU is still very low. So I see that Personally today is an opportunity because what you see as well in a lot of market is a huge demand from consumer and from enterprise for more data, More capacity, more coverage.
So there is competitive dynamic, but there is also a huge potential To increase the value of the market, so I think somewhere it is relatively healthy competition. It's competition to serve customer With more products, more capacity. Where you see more intense competition is typically Romania. Probably also one of the reasons why we have decided to sell the fixed business and because if we would need to compete there, We would probably have to put quite a lot of money in upgrading our fixed network. The ARPU is relatively low.
It's Still low with DG being an operator, which is quite aggressive on the market. So there we have decided indeed to move out of the country To be able to invest in other, you could say Poland could be also more intensive because Play has just been bought by Iliad, but so far we have not seen any increase in competition. I think there is well, everybody is looking how can we further bring fiber to the country, how can we further bring High speed Internet in the country and it's I think again more a healthy competition on trying to serve the customers on the next Steph, so I think all in all, the markets are relatively healthy with strong potential for growth as the ARPU is low, the demand is Hi. And the regulator and the government are now more and more looking into digitization of service, Rolling out of infrastructure is an important way for them to be recognized as good leader. So it's not anymore getting money out of the auction or Out of the industry, it's much more trying to roll out better infrastructure, better service to serve their customers or their Citizens better.
And I think we can now really, I mean, play on that and get value out of that In most of the countries. So I'm very optimistic about the potential of the European segment.
Excellent. And then we have one more question from Jacob. Jacob, good to see you.
Good to
see you. Hi, guys. I had actually 2 very short questions, if that's okay. Firstly, just on the revenue growth side. You're guiding for 1% revenue which is very similar to what you did over the previous 3 years, even though you've got what I take as a reasonably sizable tailwind from roaming.
So can you maybe just give a little bit of context on the revenue guidance, which looks a little bit conservative? And then just secondly, I'd be interested in just hearing your thinking around tower ownership In the region, is that something that you're a bit more flexible on and that's perhaps one of the ways where You could relatively easily drive up your Rokies in the region. Thank you.
No, thank you, Jakob, for the question. I think On revenue, I mean, it's true that roaming is I mean, it has impacted us in 2020, EUR 130,000,000 so it's quite significant. We will, of course, have some tailwind from that this year and probably next year. But next to that, we also have quite a lot of MTR cuts, which are still Coming in, it's from mid of July mid of this year, July this year. I don't think it's such an impact because it's in percentage Hi, but in the value it's relatively low, but that's anyhow something which will impact a bit the service revenue and the guidance is on 4 year.
So we have always a tendency and DT, but also myself to try to really deliver against the guidance to make sure that we Potentially even over deliver and we have a 4 year period. So I think for the next 2 years, we should probably be a bit better. But going forward, We have to be prudent and see what happens in the market. So around 1% I think is a very Decent figures and we will do everything we can to over deliver on that. On tower ownership, I think It's a good question.
We have done a tower call in Austria. But what I think and we can look At other countries and perhaps you'll hear about a bit more about that tomorrow. I don't want to reveal too much today. I'll leave something for Thorsten to tell you. But everything we will do, we will do towards DT TowerCo.
So it could be a way to improve Rossi and ever, But it will not be a leverage that we will do to 3rd party. I think the strategy of DTE is really to build a Strong tower core internally with DTE Funktorm. And so if we do carve out of tower in Europe, it will be to DTE Funktum. And then we will see as a group what we will do with our tower assets. So we will not start To do some individual tower carve out to 3rd party in Europe.
Great. Dominik, before I let you go, maybe one question from you. Now that you have of course, you worked there for your brand Proximus, before. And so I just wanted to see how does it feel to work in Deutsche Telekom in this group? I mean is that and how to Work in the European portfolio, any impressions that you can share?
No, I think it's very different. I think DT is, of course, a much bigger group. What I'm I've been impressed It's a TT is a very diverse and international company, probably much more that people sense when you look at it From the outside, so I think it's a much more international and diverse culture. And I think in Europe, I think it's very much a hidden jewel. I think Europe is a great asset.
There is not a lot of publication. So it's difficult to follow I guess as analyst or investor, but when I am here and looking at the country, I think there is a lot of potential. And I think DT is so well placed with its transatlantic foot in the U. S, foot in Europe. And in Europe, there is a lot of focus on Germany, But there are a lot of other countries and I think when we will be able to get even more scale and more harmonization within the European footprint, It is really a base from which I think we can really deliver growth and even potential Further growth going forward.
Acceleration. Okay, very good. So thank you very much, Dominik.
Thank you, Hannan.
That Brings us to the last session of this Capital Markets Day, 1st day of the Capital Markets Day, should say, Capital Markets Day, it is. So now we are welcoming our U. S. Team. So we'll be Having will be joined by Mike Sievert, CEO Peter Oswaldig, CFO and our very Neville Rae, the President of Technology.
And at the end of their presentation, Judd Henry, my colleague in Seattle, will host a Q and A to which you can register in exactly the same way as you have done the whole day. So, I'm happy now to announce T Mobile's Dream Team.
We have an amazing opportunity to take this thing we've Creative, the uncarried, supercharged it.
We
Everybody's asked. It's not just the coming together. It's what happened when we came together.
We built our extended range 5 gs network, and now we're piling off a deep
to the Hey, everyone. It's so great to join all of you for the DT Capital Markets Day. Thanks for being here. When I was last with you back in May of 2018, it was just 1 month after we announced our merger with Sprint and we shared some big aspirations for the combined company. So today, I'm happy to be back just over a year since we closed our merger to share our progress and our plans for growth and value creation.
And while I wish we could all be in bond together this year, I'm coming to you this time virtually, As is Neville Ray, our President of Technology and Peter Osvaldik, our Chief Financial Officer. Let me just start by saying How proud I am of our team and of how our employees have united as a combined company to serve our customers and deliver outstanding business results during unforeseen times like this past year. Our first year results as a combined company say a lot About our people and about our culture, because many mergers really struggle in the 12 months right after closing. We've persevered through a pandemic and economic crisis and significant social and political unrest and this team rallied together Around our love for our customers. Our success reinforces the fact that we've assembled the best team of leaders and employees in the industry It's something that continues to set T Mobile apart from the competition.
2020 also marked the True beginning of the 5 gs era in wireless. T Mobile is already the demonstrable leader with the largest and Fastest and most reliable 5 gs network in America. And I'm here to tell you why our network advantage will last For the entirety of the 5 gs era and beyond, while translating into strong business results that we believe Will result in extraordinary shareholder returns. Our mission is to be the best in the world at connecting customers to their world. And our strategy to get there isn't complicated, but it is differentiated.
We plan to simultaneously deliver The best network and the best value for businesses and consumers, something that has never been done before in our industry and something That only T Mobile can aspire to as the leading pure play wireless company. Customers shouldn't have to choose and at T Mobile, They don't. Add to that the differentiated customer experiences delivered by this customer loving team and you have a formula that allows us to pursue our Simple yet audacious vision to become number 1 in customer choice and number 1 in customers' hearts. We'll get there by focusing on 3 strategic pillars. 1st, building the world's best 5 gs network and delivering product leadership.
By turning our combined network and spectrum assets into a truly superior wireless experience, an experience that T Mobile becomes Famous for and one that's here to stay. 2nd, unlocking the potential of our scale And the superior cost structure that results from our network assets to deliver ongoing value leadership while also expanding margins. And 3rd, delivering the best experiences from the best team as we build on our uncarrier strategy to make customers happy By rewriting the rules of the industry in their favor, as we deliver on these strategic pillars, we're focused on some simple ambitions, The outcomes by which we'll be measuring ourselves and by which we think you'll be measuring us as well, they showcase our balanced approach to growth And profitability. 1st, our goal is to consistently and continuously profitably lead this industry in growth, particularly once the major elements of our integration are behind us. 2nd, translate that growth into an increasingly valuable business, Focusing on synergies, scale economies and cost transformation.
And third, we'll do all this without borrowing from tomorrow. We'll continue to make the right decisions and investments to position T Mobile for long term success. For T Mobile, all of our short and long term goals start with building the best 5 gs network. It's the underpinning of virtually everything we'll talk about today And our build is tracking well ahead of schedule and it's clearly differentiating T Mobile as the undisputed network leader in the 5 gs era. T Mobile already offers the largest, fastest and most reliable 5 gs network in America, delivering 5 gs across more geographic coverage than AT and T and Verizon combined.
And our ultra capacity 5 gs, Utilizing our spectrum depth of 2.5 gigahertz mid band and above has been rapidly expanding. While Verizon's 4 gs leadership may have helped them Over the last decade, T Mobile is positioned to be famous for our network in the 5 gs era and solidly take that crown for years to come. That's a perception shift that we're laser focused on at T Mobile, and we're already starting to see the tide turn. And because of our merger, we're essentially funding this entire network build through merger synergies. In a few minutes, Neville will dive into the value our network represents to customers and how it serves as a linchpin for our business.
Now let's talk about the work we're doing to expand our addressable markets and fuel growth for years to come. Our expansion into smaller markets and rural areas across the country will open up massive potential as our network has Expanded significantly in the last few years, delivering LTE coverage on par with the other national carriers and 5 gs coverage That's miles ahead of the competition. And when we say smaller markets and rural areas, that represents 50,000,000 U. S. Households, almost 40% of all households in America where our market share Is in the low teens today compared to our national market share of roughly 30%.
We plan to significantly expand distribution into these areas to Finally bring real competition. Our strategy to unlock this opportunity will require growth in areas where we already have Both the network and distribution assets today as well as growth in areas that will receive these investments in the future, Building the best 5 gs network throughout rural America is foundational to unlocking consumer switching And we plan to expand our physical footprint in smart ways. We'll build hundreds of new stores in small towns and rural areas over the next 5 years And add significantly more points of distribution, including entering national retail channels like Best Buy and Walmart, as well as leveraging our recently launched Hometown Experts, an innovative and cost effective initiative to recruit individuals dedicated to Sifting communities too small to support the cost of a full retail store. Combined, we expect these efforts will help T Mobile to grow our Share in smaller markets and rural areas to nearly 20% over the next 5 years. Another key area of focus is the enterprise and government After having successfully redefined consumer wireless for good over the last 8 years, we're bringing that same uncarrier attitude to businesses.
Our share today in the large enterprise space is only around 10% and we're already starting to win in this space. There are over 50,000,000 corporate liable lines today, which is a massive opportunity. We like our game plan here Because it's building on a strong 2020 performance. With our 5 gs leadership, businesses no longer have to make the trade off Between the price they pay and the quality of the network, they can have both. This includes our recent WFX launch, An innovative suite of products that are ideally suited to help companies adapt to the hybrid workspaces of the future with fully featured Secure calling and broadband products and the peace of mind of having unlimited data for those companies that have still been handcuffed with pooled data plans by the carriers.
We see room to run here with a massive market share potential running up to 20% over the next 5 years, Which is still quite under indexed versus fair share. And the B2B space is a great example of the benefits of a strong partnership with Deutsche Telekom, Affording us a unique opportunity to capture transatlantic synergies by leveraging the assets of DT and T Mobile to offer solutions to global companies. Now looking beyond traditional mobile wireless, one of the immediate opportunities is home broadband, We're bringing competition to an estimated $90,000,000,000 market. After successfully growing our 4 gs LTE home internet pilot throughout 2020, Last month was the official launch of T Mobile Home Internet, a simple, fast broadband service leveraging our Expansive high capacity 5 gs network to give customers a real choice in high speed Internet. And while others in the industry are still in the planning phases of what Wireless home broadband could look like in the future.
T Mobile 5 gs reaches more than 30,000,000 eligible broadband households Today, our focus is on a great service at attainable prices because our business plan isn't burdened with significant capital costs, Given that the network is funded by the mobile business plan, we're excited for everything ahead here in this space and we expect to serve 7000000 to 8000000 customers over the next 5 years. We're also rapidly expanding our addressable market with prime consumers Who value network quality and who may not have considered us previously due to legacy perceptions. For example, earlier this year, We launched our Magenta Max plan, giving customers the industry's only truly unlimited plan And putting the full capabilities of our ultra capacity 5 gs in the palm of their hand, the early indicators that we see from Magenta Max When we offer the right plan that really showcases our leading 5 gs network. So we'll unlock customer growth by both Growing the total number of customer accounts and deepening these customer relationships with more premium services and additional connected devices to consistently and profitably grow both our core business and exciting new businesses. T Mobile continues to win customers because of how our company creates experiences.
And we're relentlessly looking for ways to Simplify and optimize the customer experience. Our focus is on further enhancing our digital capabilities To provide even better options for customers who after a year of the pandemic are showing a willingness to work with us Digitally in ways they didn't before. For us, it's all about serving the customer how they want to be served and building on our already industry leading award winning to the customer service experience, which is our secret sauce. Ultimately, we believe that when you provide customers with the best network And the best value and the best customer experiences, they will become loyal ambassadors for the brand and further drive our growth and long term success. Now let's talk about merger synergies and our financial performance.
I am Incredibly proud of the team for being able to execute and perform in a competitive marketplace, while simultaneously driving integration faster And better than expected to capture our merger synergies and deliver value for both customers and shareholders. Our 5 year growth and financial plan built on the conservative market assumptions I've shared with you here creates enormous potential shareholder value. Peter will go into greater depth on these topics in a few minutes. Now before I turn it over to Neville and Peter, I want to provide some insight on another important focus area for T Mobile, making an impact that matters for our employees, our customers and the communities that we all serve. Throughout the merger, we talked about how we've not only become a bigger company, but also a better one using our network scale and resources for good.
Our marquee initiative here is Project 10,000,000 and it's focused on the audacious goal of helping to connect Every single student and eradicate the homework gap in the U. S. So kids can get the access they need And the education and equal opportunity that they deserve. We launched this unprecedented 10 point $7,000,000,000 initiative last year and then enhanced it to address the more pronounced inequities that have arrived in the wake of the COVID-nineteen pandemic. We focused heavily on our people over the past year as well because we believe only the best team working together and inclusively Can deliver the best experiences.
With the world watching, America has experienced significant social unrest over the past year in the quest to achieve Greater Racial Justice. At T Mobile, our commitment to diversity, equity and inclusion plays an integral role in our culture, and it always has. Last year, we launched our 5 year equity in action plan, which reflects the ways we're embedding DE and I into our culture as the Un carrier. And we continue to build diverse talent in our leadership ranks to reflect our Highly diverse employee group and the communities we serve with more ambitious programs in this space than ever before. In addition, we continue to follow through on our long standing enterprise sustainability commitments.
T Mobile was the 1st major telecom to commit to 100 percent renewable energy back in 2018, a goal that we expect to achieve this year. And in recognition of our efforts, we were recently named to the CDP's A List for Climate Change, the gold standard of corporate environmental transparency. We've created ambitious goals to positively impact the planet and we're immensely proud to be the only U. S. Telecom given this top listing.
Okay. Now let me turn it over to Neville to tell you how T Mobile's 5 gs network is leading this industry into the 5 gs era And how we are prepared to sustain and expand our network advantage for the duration of the next decade and beyond. We have been able to create a great network that's not only Welcome. We have the networks. We have the spectrum.
We have the People, we have the technology.
Largest, fastest and now we're most reliable too.
It's so great to be here today, and I'm excited to update you on our network journey and the progress we continue to make. As many of you know, I have been personally invested for many years in creating a leading network here at T Mobile, but there has never been A more exciting time in the growth of our network than right now. We are uniquely positioned to become famous for network as we continue to combine our superior assets and execution to deliver a demonstrable and sustainable 5 gs and overall network advantage. There are 5 major and compelling reasons why our network leadership position today will be a durable advantage into the future. Let me walk you through these 1 by 1.
1st, We have a clear 5 gs coverage leadership position today with 5 gs coverage in all 50 states and Puerto Rico. Our extended range 5 gs provides reliable coverage where customers live, work and play. And just less than a year after reaching nationwide, We now cover 295,000,000 people with 5 gs across more than 1,600,000 square miles today. That's nearly 4 times more than Verizon and over 2 times more than AT and T. And we're expanding our to the extended range 5 gs to over 300,000,000 people by the end of this year, and we expect to cover 97% of all Americans by the end of next year.
At the same time, we are the only operator to have deployed dedicated low band and mid band spectrum, Delivering on the true promise of 5 gs, with our ultra capacity 5 gs delivering game changing speeds Averaging 3 25 megabits per second and reaching 140,000,000 people already in 2021. And we're expanding our ultra capacity 5 gs at a remarkable pace to bring those game changing speeds to 200,000,000 people by the end of this year, expanding to approximately 250,000,000 by the end of next year and on our way to bringing ultra capacity to nearly 90% of all Americans by the end of 2023. Multiple Independent third parties, including Ookla, OpenSignal and Ormlaut, all recently gave exciting accolades to T Mobile's 5 gs network Based on real customer usage from millions of device measurements, we just continue to pull away from the pack. OpenSignal recently released their latest report showing that T Mobile customers' average 5 gs download speed Increased by 23% since the beginning of the year, while speeds on other networks stayed virtually unchanged, widening the gap to competitors as T Mobile now has nearly 50% faster speeds than Verizon and 30% faster speeds than AT and T.
All signs point to one clear fact. T Mobile is America's 5 gs leader with the largest, fastest and most reliable 5 gs network. 2nd, our network upgrade program is fueled by synergies from our network integration. This integration program, combining the assets of Sprint and T Mobile Networks, has presented the opportunity to not just combine the networks for LTE services, but upgrade them at the same time for 5 gs, unlike our competition who face incremental 5 gs costs in all that they do. 3rd, we maintain a meaningful spectrum advantage following the FCC's recent C band auction, where we added to our ultra capacity 5 gs in urban and suburban areas that the spectrum is well suited for.
We came out of the auction with the best mid band spectrum assets by far, While our competitors spent unprecedented amounts trying to catch up, our mid band is mostly comprised of frequencies with superior propagation to C band, which means they are superior not just in reach, but also in deployment costs. With this recent C band spectrum auction complete, we are well positioned to maintain our 5 gs leadership for the duration of the 5 gs era. Not just for a year or 2, our position and advantage will be longstanding. Bringing all of this together, Our 5 gs leadership is even more clear when you combine both our spectrum and coverage deployment plans as contrasted to our major competitors. 4th, through this capital efficient deployment, we have the financial capability to smartly invest and maintain this network advantage, as Peter will describe in a few minutes.
We are delivering faster on this deployment and a broader rollout of the 2.5 gigahertz spectrum for less total capital than originally planned in the merger announcement. This is as a result of material procurement savings from new agreements with key partners and significant savings from an efficient deployment engine, Including adding multiple spectrum bands on a single site at the same time as well as more effective controls via a lean deployment model effectively reducing to Time to Deploy. And 5th, but by no means least, we have the most technically advanced network and a clear leadership edge on 5 gs Innovation. Not only are we building the densest, deepest and broadest network, but we are also building on our history of 5 gs firsts and embracing technological evolutions as they are ready to improve customer experience, lower costs and unlock new revenue opportunities. And our network enhancement program is running at a truly unprecedented pace with thousands of radio upgrades underway each and every month.
So in summary, I am so excited that T Mobile is leading what I expect will be a 5 gs revolution. We have all the tools to succeed, a robust plan and a powerful team to go execute it. Now let me pass
the mic over to Peter. Thanks, Neville. I'm excited to get to our financial highlights starting with a look at synergies. As you already know, we beat our own aggressive synergy targets for 2020, realizing $1,300,000,000 or 4 times what the original merger plan And during our Q1 earnings a couple of weeks ago, we updated our 2021 synergy guidance, Now expecting to realize $2,800,000,000 to $3,100,000,000 in merger synergies, which represents a $550,000,000 year over year increase in avoided costs and a $1,100,000,000 year over year increase in P and L benefits At the midpoint of our 2021 guidance, helping to fund the investments in our network and growth initiatives this year, and we're not slowing down. Our team's strong execution led to us updating our expectations at our Analyst Day for total run rate cost synergies of approximately $7,500,000,000 per year by 2024, up 25% from the original merger guidance of $6,000,000,000 While the full original and increased run rate synergies are achieved in the same timeframe, primarily due to the timeline for avoided costs, We overachieve in each year relative to the original plan.
In fact, we now expect to exceed the original $6,000,000,000 target in 2023. As we have said from the beginning, these massive synergies are unlocked with some one time upfront cost to achieve. We continue to expect approximately $15,000,000,000 of total net cost to achieve, delivering more synergies with no incremental cost. This faster paced and increased run rate results in a new net present value of over $70,000,000,000 for shareholders, More than 60% higher than the original $43,000,000,000 NPV in the merger case, Including a lower cost of capital, which reflects not only lower rate market conditions, but just as importantly, Our scale and performance driving a lower cost of capital as demonstrated by our capital markets activity. Our team's strong execution and our strategic plan is now expected to deliver financial results that exceed both the original 3 to 4 year And longer term targets that we provided in the merger announcement.
For reference, we are using 2023 as the comparable midterm point as it is 3rd full year following our actual closing date. And as we think about the long term projections for the business, we are using 2026, Which is actually earlier than the original long term guidance milestones, which assumes 7 to 8 years out. And of course, our ambitions include continued growth in the business beyond 2026, driving a sustainable increase in shareholder value in later periods to our Q2. All right, jumping into the numbers and for clarity, these are on a U. S.
GAAP basis, which will differ slightly from IFRS. Core adjusted EBITDA, which reflects our underlying business performance without the noise of declining lease revenues As we deemphasize device leasing quickly post closing is now expected to be between 22.8 And $23,200,000,000 in 2021. In 2023, we expect to be between $28,000,000,000 $29,000,000,000 Versus the original merger plan, which implied core adjusted EBITDA of $25,000,000,000 to $27,000,000,000 a $2,500,000,000 increase at the midpoint driven by growth in service revenue and higher synergy realization. We expect further growth in 2024 with core adjusted EBITDA expected to be in the range of $31,000,000,000 to $32,000,000,000 With additional service revenue growth and full synergy realization,
long term,
we expect Core adjusted EBITDA to be more than $36,000,000,000 more than $1,000,000,000 above the high end of the original merger target Driven by higher service revenues along with additional efficiencies including in the areas of continued distribution transformation and an increasing consumer digital experience. Looking at capital expenditures, we now expect CapEx in 20212022 to be between $11,700,000,000 $12,000,000,000 annually as we deliver our network integration milestones earlier and build a nationwide multilayer 5 gs network with better capital efficiency, thanks to both material procurement savings from our improved scale and deployment efficiencies which Neville highlighted. We expect CapEx in 2023 through 2026 to be between $9,000,000,000 $10,000,000,000 per year, reflecting the capacity and network efficiencies we expect after having completed our network integration and be largely done with our nationwide 5 gs deployment by 2022. This capital plan also includes All of our expected costs for C band deployment. This all translates into the promised unlock of significant free cash flow.
In 2021, we now expect free cash flow to be between $5,100,000,000 to $5,500,000,000 Looking ahead, free cash flow is expected to be between $13,000,000,000 to $14,000,000,000 in 2023, a massive $3,000,000,000 or 30% increase from the original expectation of $10,000,000,000 to $11,000,000,000 again a product of Increased growth in service revenue and operating leverage, bigger and faster synergy capture and improved capital efficiency. We see further growth into 2024 with an expected range of $16,000,000,000 to $18,000,000,000 and long term free cash flow to be more than $18,000,000,000 above the high end of the original target. And similar to our 2021 guidance, Our mid and long term free cash flow guidance does not assume any material net inflows from securitizations. And while our for mid term and long term milestones are all above the original merger plan. Equally exciting is that this is really a story of Cumulative over performance in every year, delivering cumulative free cash flow through 2025 of up to $65,000,000,000 Up nearly 20% from the original plan.
So as Mike highlighted earlier, with our increased cash flow, we see the flexibility for Substantial shareholder returns, potentially up to a total of $60,000,000,000 from 2023 through 2025, all assuming a conservative mid-two times core adjusted EBITDA leverage ratio. As you would expect, we will always focus on maximizing value creation for shareholders and we'll assess future spectrum purchases, M and A options And share repurchase opportunities to create the most shareholder value. And of course, there is massive potential beyond 2025 as well. I couldn't be more excited about this updated plan and I'm extremely proud of our team's ability to consistently meet or exceed the guidance we commit to. We have done that now as T Mobile since 2013 and we have every intention of continuing to deliver on that front and maintain the trust you place in us.
I can't think of a better high note to end on. Now, I'll hand it back over to Mike before we get to your questions.
Thanks, Peter and Neville. Great job. Okay, we're eager to take your questions, but let me leave you with a final thought. As you heard in our remarks, we believe T Mobile is uniquely positioned with this once in a career value creating opportunity. We have a great hand.
And to me that means the industry's best assets, a clear and simple business strategy that's already proven, Lots of room to run, exciting new businesses where we have permission to win and a team with a track record of delivering. Add to that a strong balance sheet and a compelling financial plan and the result is a business with massive cash flow and value creation potential. On top of it all, we have the opportunity to continue to change and improve this industry yet again as the Un carrier to the benefit of consumers and businesses everywhere, To be the best in the world at connecting customers to their world and to earn their hearts in the process, I am tremendously excited about our future. Now while we get in a position to take your questions, I'll leave you with this video, A collection of a few words that form our brand manifesto, words that say everything you need to know about who we are, What makes us different and where we're going? Take a look and we'll see you live in a minute.
Thanks, everybody. People first, treating them right, and changing the rules in their favor. As the Un carrier, we This revolution is far from over.
I'm ready to go. Now
are far from done. We're taking this revolution to the next level, becoming the best in the world at connecting customers To their world and earning a place in our customers' hearts forever.
All right. All right. We're excited to get to your questions. So let's get right at it. It looks like we've got some names queuing up already.
So let's take our first question from Usman Ghazi from Berenberg.
Hi, guys. Good to see you and thank you very much for the opportunity. It's always great to see the exciting presentation I guess The question I had was on one of the comments you made earlier about investing to create that network perception change in the U. S. And specifically, I don't know whether this is the right perception.
I'm obviously sitting in London, so I might have gotten this completely wrong. But it seems that Verizon Obviously, has a very close relationship with Apple. I mean, at the iPhone launches, you see them Verizon there and on the TV when I'm watching, I mean, there's a lot of joint advertising going on between Verizon and Apple. And I'm just wondering, I mean, at first, it seems Surprising obviously because I mean you it's pretty clear you have the best network and you're extending that lead on 5 gs. So is there any chance of Timas being able to break that stranglehold that Verizon has with Apple, obviously, because of the captive 4 gs base Or is it going to take more time?
Yes. Thanks, Usama. Great question. Thanks for joining. And Yes.
It's very interesting. I'll answer it 2 ways. First of all, as it relates to the big companies, I'd say T Mobile, AT and T and Verizon all have great partnerships With Apple and the other major providers, so no concerns there. And I wouldn't over read Verizon appearing at their event in any way. We all do the exact same amount of joint advertising And co development and so many things.
But your question has another premise to it that I think is very important, which is Verizon has established For over a decade now, brand fame around being the best network in the United States. And That's very clear. And that's something that you heard us remark on in our upfront remarks that we know our opportunity is to turn that around. And let's face it, in 2010, at the beginning of the 4 gs era, they jumped out in front and AT and T jumped out with the iPhone, but Verizon jumped out With LTE and they got after it faster than anybody else and they claimed that mantle of network leadership in the 4 gs era and then wrote it. They made the rules of the 4 gs era.
And those rules, by the way, were terrible. Things like contracts and overages and roaming when you leave your country and Treating people poorly and so forth, high prices. So, we came along and decided to try and change those rules and we were always in catch up mode on our network During the 4 gs era. Today, in the 5 gs era, T Mobile has the opportunity to make the rules. And those rules are going to be customer friendly and they're going to be built around a brand that in the 5 gs era claims the mantle of network leadership.
And that's so important. Right now, we have 5 gs leadership, way ahead as Neville just got done describing to us. But we have to translate that into perception of overall network leadership. That's going to mean working with our partners like Apple to the premise of your question, It's also going to mean taking advantage of big expansions into the places where we've historically been behind. We already get good credit in the big cities for having a good network.
But in the huge slots of this country, 40%, 50% of the country that are smaller markets in rural areas, we've been way behind. That's a massive tailwind for our business as we start to come up the curve with the demonstrably best 5 gs network in rural America as we talked about in our remarks. So, we're taking this very seriously. We know we don't just have to be the best. We have to get credit among businesses and consumers for being the best and our strategies are geared around that.
Thank you.
You bet.
All right. Excellent. Let's take our next question from Joshua Mills from Exane.
Hi, guys. Great to see you and thanks for the questions. There's 2 for me. The first is just related to what AT and T has talked about earlier this week with the deal they've done on Time Warner, the decision that they want to accelerate in CapEx, market share gains, etcetera. Now You've talked a lot about how 5 gs is an opportunity or a window for you to win share and change perception.
And I guess that a lot of the work you've been doing is to try and Extend the window on 5 gs leadership and use that as an opportunity. So my question is, firstly, does the AT and T Deal and the cash they've unlocked perhaps either narrow that window, because they'll be spending more on CapEx or make the market more competitive in the near term if they choose to Deploying more cash into handset subsidies. And then the second question go on, sorry.
No, please. Let us
know, yes.
Yes. And the second question is just, we've heard a lot today from the European side of Deutsche Telekom, and I think often we look at the U. S. Business and see the growth in returns and are quite envious. But A key theme that's come out of today's presentation is the importance of convergence, fixed line, etcetera, in Europe.
Now I understand the U. S. Market is different, but Do you see any advantage at the moment from your competitors owning fixed line? And is there any potential scenario in which you would think about either doing deals with The fixed line operates on wholesale or maybe even building organically in that space? Thanks.
Thank you. Those are great questions. First of all, I'll start on AT and T and then let Neville pile in. I think what we've seen from both Verizon and AT and T over the past 2, 3, 4 months and certainly this last week with AT and T is a journey towards both of our major scaled competitors realizing that T Mobile's strategy of being a pure play mobile internet company is the right one. All content and entertainment of all kinds are leaving their Prior linear forms and going digital, landing on the Internet and the Internet itself is going mobile.
And T Mobile years ago established itself as a Pure play mobile internet company and sought the best assets and won the best assets in the industry to lead the industry as the mobile internet company Focused on this space and it's a great space. This is a viable profitable industry that's changing people's lives in big ways and both of our major competitors have decided to wake up and try and emulate our strategy. The problem is they're years behind and we have the wherewithal to stay ahead For the duration of the 5 gs era, as Neville mentioned in his remarks. And so an example of that would be and I'll let Neville jump in before we get to your second question. An example of that is what Neville took you through in his remarks, which is the pace at which we're going, even with AT and T's newfound love of mobile Internet, Will allow us to stay ahead, especially when you apply not just the spectrum we'll have on 5 gs, the amount of spectrum, but the amount we have deployed
on 5 gs, multiply that to look at megahertz pops as
Neville showed us. And the advantage Apply that to look at megahertz PoPs, as Neville showed us, and the advantage that we have is massive and sustainable. Neville, maybe you can comment on it.
Yes. Thanks, Mike. And obviously, delighted to be here today and take the cues. To your question, Josh, on what happened this week with AT and T, I mean, finally, now we see our major U. S.
Competitors, as Mike said, starting to look at our strategy overall as a business. But importantly too, They're starting to mirror and chase our network strategy. And so we've talked for a long time about the capability of a multilayered Mid band, low band network. And so now we see AT and T kind of coming all in on that model and plan. And to just shape some of the news and announcements they made, I mean, the one thing that caught my attention was that they said they would have 200,000,000 people covered with the recently acquired C band Spectrum by the end of 2023.
So To contrast that to where T Mobile is today, as I outlined in my comments, 140,000,000 people we've covered in the last year since we combined with Sprint. By the end of this year, 2021, we'll be at 200,000,000 people covered on that mid band layer and a much deeper and richer spectrum layer than AT and T can accomplish by 2023. So even though they're coming after and starting to mirror and chase our strategy, We have an incredible leadership position that they now have to try and close that gap. And so as we talk through here, every day, ARM network and the performance of this network is improving. And our customers are starting to understand that more and more each week And as we move through every month.
And so for AT and T and Verizon, there's a lot of catch up they have to do to try and mirror and match what we can do this year inside 2021.
Just to the profitability piece before we move to your On fixed assets, look, I think this is very good moment in time for the industry. And if the Premise of the question is, if Verizon and AT and T have finally decided to come around and pay attention to their mobile Internet businesses, is that bad for us? And I'd say absolutely not. Competition is tricky only if there's no differentiation. Competition is a great thing and something welcomed by to mobile because our position is differentiated and the more this industry focuses on mobile, the more this industry focuses on Smartphones, the more we get to showcase to people that increasingly consider whether they're with the right carrier in a more vibrant market, our differences, Showcasing our differences of being the 1st company in the history of this industry to be able to simultaneously offer the best value, Which we can sustainably do with our asset base and the best network where we're ahead by several years and positioned to stay ahead.
That's something that in a market that's more vibrant and made a market where there's increased switching through the efforts of our competitors It will ultimately favor us. And we think it's a very good market. It's the profitable part of the industry. That's why all of our competitors have decided to focus on it. I think that means that they understand that it needs to stay profitable, because this is the knitting.
And so all these signs, I think, are good signs for us. Now to the second part of your question about fixed and we'll try to be quick here. I'd give the short answer and then again turn it to Neville. No, we don't see it as an advantage. In fact, when the profit when the Primary profit pool is mobile as we just talked about.
The advantages of owning fixed assets are a bit false. And you'd be stealing from 1 Welcome. Profit pool to feed the other. And so the ownership advantage gets diminished. We think we can get there and have demonstrated we can get there through partnerships.
We have fiber relationships all across this country. There's plenty of supply. And when it comes to tackling enterprise opportunities, We're working with partners like our recently announced collaboration with Lumin. So just briefly Neville on whether or Not owning fiber is a disadvantage or perhaps if it's an advantage to have the flexibility that we have.
No, I mean clearly, Mike, us, I mean, it's an advantage for us to drive our investments into our radio and our wireless network. And we have just tremendous deals and partnerships out there to support our fiber delivery to our cell sites in a 5 gs world. And we've had fiber to our cell sites for many years. Now we're just scaling that delivery. We have actually decreasing price levels coming into our business, while we scale the throughput and output on those links.
So we're very, very comfortable today with how we construct our delivery there.
And this is an area where to the premise of your question, the U. S. Market is a little bit Obviously, the trend here, we never did fully converge. And in the recent moves as it relates to media convergence, both of our major skilled competitors shedding media assets As a sign that there wasn't the promise to benefit of convergence that they had sold shareholders.
All right. Let's take our next question from Ulrich from Jefferies.
Yes. Thanks very much. Mike, if Deutsche Telekom were to sell the T Mobile estate tomorrow, what elements of your midterm guidance would you have to change?
I mean, that's I suppose
it's a slightly cheeky way
I'm asking what are the tangible benefits that the parent brings
to the party from your point of view where you are assessing?
Well, first of all, I'm not sure it would change anything in that. I'll answer it from 2 perspectives. One is, we've certainly been enabled to buy DT through the years with investment, but now we have a business that is producing significant cash And is able to for in recent years acquire its financing on its own. So a company that is viable on its own. And secondly, it's a business that is neither constrained by DT.
Every major thing we've needed to do, we've been able to partner with and be supported by our By our major owners, DT, and so we've not been constrained yet either. What we do have right now are some terrific opportunities for synergies as I talked And we're collaborating with major global companies, to serve those companies together in transatlantic ways. And that's terrific. So, look, we DT, I think much to its credit, has run and allowed us to run the U. S.
Business as an independent U. S. Public company with them as our major shareholder. And that has allowed us to focus on our knitting in a way that's created an awful lot of success. And so, For us, we're consolidated into DT and are looked at by DT as part of DT, but they deliberately ask us and with our Board to run this as an independent company.
And my fiduciary is to all shareholders of our company, all shareholders of TMUS, DT included. And that's how we run it as an independent U. S. Listed public company.
Thanks very much. Thank you. You bet.
Great question. All right. Let's go to Jacob Bluestone from Credit Suisse.
Good morning, guys. Thanks for taking the question. So I had a question around the capital returns that you referenced earlier. And I guess there's 2 aspects. 1, can you just sort of talk us through how do you look at dividends versus buybacks When thinking about it from a team's point of view and also as you rightly pointed out, you've got a fantastic track record of beating your own guidance.
So do you think there is a potential that we could see those buybacks or those capital returns starting sooner than 2023? Thank you.
I absolutely love it. You announced an up to $60,000,000,000 share buyback, historic buyback program And it's how soon can it start. So Peter, can it start by 2022 and can it be bigger than we promised?
Absolutely. Well, thank you so much for having us and a great partnership here. So first off, I'm really excited about the massive free cash flow generation of And it truly is a differentiator as we've talked about this massive 5 gs network that's being built, the greenfield opportunities that others do not have In smaller markets in rural America, in enterprise and the unlock of synergies during that whole timeframe allows us to have expanding margins And by the time we get to our midterm guidance, have the best conversion of service revenue into free cash flow, which helps unlock and allow those massive A couple of questions you had. One is how do we think about it? Would we do share repurchases or dividends?
And
right now, the way we're thinking about it is our intention is to continue to be a growth company, both in the mid term as well as the long term guidance. So as we see it right now, we're definitely thinking The flexibility that share repurchases versus a dividend offer would probably the way we would initiate shareholder returns and of course assess it during that Period and go forward. In terms of can we start early, as you know, right now, the focus point is building this massive network And spending the cost to achieve funds to unlock the synergies and the integration as rapidly as possible while also making all the investments to unlock those markets and get to those rapid free cash flows. So is there opportunity? If we go faster, If we have better success in terms of quicker integration, quicker synergy delivery or outperform some of the assumptions that we put in the model around growth, ARPA ARPU.
There's always a potential that we could come to our Board and ask to initiate something even before 2023. Thank you.
Excellent. Let's take our next question from Polo Tang from UBS.
Hi, everybody. Thanks for taking the questions. I just have 2. So it's clear that you're significantly exceeding expectations in terms of both Growth in synergies, but what do you see as the main risks to your medium and longer term outlook? Is there anything that keeps you awake at night?
Is it cable gaining share? Is it Dish building a 4th mobile network? Or is it AT and T and Verizon Getting more aggressive. So that's the first question. And the second question is, as you obviously outlined a clear plan in terms of accelerating growth from Expansion into rural areas, the B2B market, but also fixed wireless access.
Are there any recent data points that you can share To give us an idea of how you're progressing in these new segments.
Sounds great. Well, I'll start. It's a great question, Polo. And the way I think about it is that, for me, obviously, we We've built this company by being fighters, by playing above our weight, by being scrappy, by running scared, by never resting. You saw some of that philosophy in the video that we ran right before we came on.
And look, I think competition is a great thing, as I was saying earlier, as long as we're differentiated. And so the thing that keeps me up at night is making sure that in every time period for the foreseeable future for years to come, T Mobile Is well differentiated in this market for both businesses and consumers, because that's what allows us to navigate competition and win like we've been doing for years. As it relates to the specific competition, look, I feel great about our hand of cards. It's never been better. Relative to cable and DISH and smaller companies, We have the scale and we have the advantage of our synergy backed model and we have owner economics.
It's going to be very hard for much smaller companies to compete with us Over the long haul on being the best value, something that our brand is famous for in the United States. As it relates to our scaled competitors, We have better assets on network. The factor of competition for scaled competitors is network. We're way ahead and with the superior assets and balance sheet to Day ahead. And that allows us to compete on product leadership and network leadership with the scaled competitors.
And so, look, I feel great about our differentiation potential. As I said in my first comment, we're going to need to convince the world. Our brand is coming from a place of where we haven't been the network leader and that's a risk to our business. We've got to convince businesses and consumers that we are the demonstrable network leader in the United States and we've seen great progress on that. With the percentage of people seeing us as the 5 gs company, more than doubling just in the last 6 months.
So then the second question That you're asking about is our big growth areas like small town rural, smaller markets, prime suburban families, enterprises, Home Broadband. And I just tell you that all the signs are looking good for these growing businesses. As you know, we're not starting from scratch. We declared several years ago a path to move from 230,000,000 to 265,000,000 people covered By our full distribution and we carved out shares from single digits now up to 13% share in smaller markets. And we're saying In our plan, the one that delivers all this cash flow that we can in 5 years after a lot of effort get it all the way to just 20%, just shy of 20%.
And if that sounds a little conservative to you, it should, because as you know, our national market share is well over 30% and that includes a giant swath of the country where it's only 13%. So do the math on The balance of the country, especially the big markets where T Mobile already is the market leader. So that's a terrific opportunity. Similarly, We're a 10 share in the enterprise space and already growing share at a rate that would allow us to exceed our ambition of being a 20 share in the planning horizon. Our last two quarters were some of the best quarters in our history when it comes to gaining share among enterprises for smartphone Adoption.
So, some terrific early indicators. Home broadband, as you know, we've piloted it for a year in LTE. We just launched it. And the experience that customers are having is fantastic. We look at early on, you're looking at things like remorse rates and net promoter scores and whether or not People are happy with the service, because that bodes best for whether or not our long term aspirations are solid.
And the Net Promoter Score has tripled From people who adopted our service versus what they the score that they gave their prior provider. So, they're very, very happy with what we're serving them in the early going. Those are a few things and we'll be sure to check-in as we announce each quarter and provide some spot reports here and there on how we're doing on these growth trajectories.
Great. Thanks.
You bet.
All right. Let's move to Steve Malcolm with Redburn. Steve, go ahead.
Thanks. Thanks a lot, Jud. Thank you, guys. Thanks for taking the question and great presentation. Paul was very upbeat as usual, which is great.
Yes, a couple. Just on coming back So the collective outlook for the industry, I mean, I think we all understand your 5 gs network advantage. But when I look at what you're saying, it seems saying Verizon You all seem to think you can grow EBITDA in mid single digits, just sort of backing into the AT and T release. It looks like they think they can grow EBITDA 5 6%. Do you think that's a credible position for the industry over the next 3 to 4 years?
And if not, what is the downside of maybe your big competitors failing to hit their targets? And then just on fixed wireless access, I know it's very early days, but can you maybe help us understand what you think the sort of annual switchers pool in the States is? Give us some sort of bottom up sense of how you get that 7,000,000 or 8,000,000 number, a percentage of the gross adds that you have to take to get there, that would be very helpful. You'll understand the top down picture, but the bottom It would be quite interesting. Thanks.
Yes, thanks. Well, first of all, on the home broadband piece, I can't unpack it for you too much other than the fact that if you think about the market that we're addressing, the vast A huge swath of the market, a significant minority, in fact, almost half of the market where we're going has no choice. They have 1 or fewer options in rural America, smaller towns as it relates to home broadband. And so what we're doing is bringing our model that knows how to compete into these markets and we're going to be bringing competition and choice for the first time. And it's important to note that we're ahead of our other wireless competitors in this area.
And so, think about it this way, when we arrive in town with a viable option that's high quality and lower price, There's suddenly going to be a big market out there, people saying, hey, could I save some money in a time when the economy is probably telling people to find ways to save money. And at the same time, we're advertising our mobile service and our 5 gs leadership in their neighborhoods. Now, when our competitors arrive, when Verizon and AT and T arrive later, AT and T arrive later, they have
to do more than that.
They have to offer something that's better than T Mobile To be a late entrant, they have to come with a superior point of difference and they don't have it. They're not going to have that to offer in very many places. And so That shows I think the importance of our urgency of getting to these markets quickly with our mid band strategy. Now as to your first question, the health of the industry. Listen, I take it as a very good sign that both of our major U.
S. Scaled network competitors have Excited to focus on strategies more similar to T Mobile's mid band centric 5 gs oriented Focused on the knitting pure play mobile internet companies, who then say they want to grow their margins. And to me, those are all healthy signs for the industry. This is a viable, Profitable industry, it's capital intensive, it's difficult, it's competitive, it's getting better for consumers every year, but it's got players that Are now going to be able to have no choice, but to be focused on the overall profitability of their mobile operations, which is probably a good thing for the ongoing Health of the industry. They have no place else to go to make their financial aspirations.
Now, the second part of your question is which is Asking me to speak to their credibility. Listen, I can only speak to our team's credibility and thank you to the last couple of people who gave us some credit for the fact that we do what we say around here. When we say we're going to make 100,000,000 pops on mid band 5 gs by the end of 2020, we get there. When we say we're going to get to 200 in 2021, we get there. When we say what the financial results are going to be, we go get that done.
And our competitors, look, what they're doing today is a complete about face from what they stared at the camera just a month ago and said they were going to do. And so, look, I can't speak to their credibility. There's some disarray and some turmoil, it looks like from the outside. But what I can say, Regardless of their words, which I'm not sure what people are perceiving about the quality of their words right now, regardless of their words, my perception is They have no choice but to treat this industry as the place that they will drive margins and cash flows. And that's probably overall good for the health of our industry.
All right. Let's take our next question from Ottavio Adarizio with Thierry General.
Hi. Thanks for taking the question. Congratulations on the results. A couple of questions. It's actually both for Peter.
The first is a follow-up from shareholder returns. The second is on the future renewal of tower leases. On the shareholder returns, I didn't hear about the credit rating as a sort of key priorities whenever you decide about the cash distribution. Consider that you are still non investment grade and in a climate of rising interest rates, Could you just tell us if your share buyback to start, what leads the acceleration, will be timed According to an upgrade to investment grade for your credit ratings, that is not a priority. And the second one is on your renewal of the tower leases.
Now T Mobile does not report net debt with total obligation included. But Deutsche Telekom does report debt I'm Pander, IFRS. And that's required to capitalize on leases. Now I believe that T Mobile has 3 to 4 years left in the tower leases with Kran Castle and SBA Communications. As you renew American Towers lease 1 or 2 years before the expiry date, would you plan to renew the current Castles and SBA cons within the next 2 years?
And if so, would that the impact on tower obligations in mobile is smaller or larger than the $11,000,000,000 Rick, a happy recorded afternoon with TNT. Thanks.
Excellent. Well, thank you for those excellent questions. And one, We are absolutely focused on getting to corporate family investment grade rating and that's a priority for us in this The business plan with a massive unlock of free cash flow and rapid deleveraging where we'll be in the mid-two percent, Corey, but our leverage range by the end of next year Allows that for us and we're absolutely taking that as a priority. You can already see where our secured investment grade rated notes Trade ahead of AT and T even today. So, I think the market takes us very seriously.
They're very much looking forward to us delivering on the progress And that's the stepping stone to get to IG. I don't see getting to corporate family IG as the precursor to beginning shareholder returns. It's something we would Consider in terms of the timing of that, but they might come very closely together and not necessarily a precursor for us. On tower leases, so yes, you mentioned and referenced our ATC renewal, which was just an incredible job by Neville and the team To allow us massive flexibility, lock in decreasing escalators in the industry for a significant length of time And generate, most importantly, cash savings from day 1. Yes, there's accounting, interpretation of this that Puts it on the lease liability, but from a cash savings perspective, it was day 1 savings.
As it relates to Crown, The priority right now is building this 5 gs network and giving Neville and his team all the tools necessary and investments necessary to maintain this lead for the duration of the 5 gs era. And if there's opportunity to do that, that makes economical sense and benefit With Crown, then of course, we're going to entertain that.
And the impact to energy cover obligation will be Large or small? Because from memory, I think your exposure to Crown and SBA combined, it's larger than the one towards American Towers, At least historically, we are now going forward.
Yes. I'll tell you, I can't speak to where any sort of negotiations Can end up, but I can tell you that just like we approach ATC and just like we approach everything, we're looking towards value creation for this enterprise, flexibility To maintain the duration of the 5 gs era, the network advantage, they're giving Neville the flexibility, but also creating economic advantage for our shareholders. Where that ultimately ends up in terms of a magnitude and when, it's hard for me to predict right now. But those are going to be the fundamental drivers for any decision that we make.
All right. Let's take next question from Akhil Dhatani from JPMorgan.
Hey, guys. Thanks for taking
the questions. I've got 2, please, if I may. The first one, obviously, we've talked a lot about your accelerating cash generation And the $60,000,000,000 buyback potential that you have. And maybe just wanting to address that question another way, which is, obviously, there is accretion and value to be created by buying Stock, but potentially that money could also be used to accelerate growth or find new other opportunities to create value. So I just wondered if you could talk about that trade off.
Are there other areas of opportunity for growth that you can think of? Where else could you spend that money if we think about So that's the first one. And then the second one is, sitting here in Europe, we always struggle With the belief of CapEx going down a lot long term, Europe and telcos haven't had the best track record on that front. You've obviously got a very nice message around CapEx going down to €9,000,000,000 to €10,000,000,000 long term. Can you just talk us through How we get confidence that CapEx can reduce to those sorts of those long term and so on?
Yes, I'll start and then maybe ask Peter to comment, Because your two questions are kind of related to each other. First of all, this business plan that we have crafted is a growth plan For the duration of our planning period and beyond. So it includes the investments that we need to make in order to continue growing after the planning period. And that's different than I think some business plans out there look like. And so in the out years, these $9,000,000,000 to $10,000,000,000 In CapEx, what we believe we need to have a viable competitive network on the back of years of building on a superior asset base In order to be able to continue to grow and the delivery of significant cash flows that gives us the potential for share buybacks Is net of investments that we would make in ongoing growth.
Now
that's not
to say that there might not be trade offs As it relates to the growth that we have, and potential greater growth opportunities that could come instead of those returns. And so it's important to understand that as we go along, we'll be looking at opportunities and if there are great opportunities that accelerate our long term potential, we'll trade that off And we'll be very transparent as we do that.
Absolutely, Mike. I couldn't agree more. It's going to be looking at that point in time as to What are the opportunities in front of us to create the maximum shareholder value? But what's equally exciting is, as you stated, is the magnitude of free cash flow that this Not only from 2023 to 2025 of the $60,000,000,000 but beyond into the long term that continues. So you have a lot of room with free cash flow generation to make the right trade offs and decisions and maximize shareholder value, not only in the midterm We're doing but also into the longer term.
On CapEx, one of the beauties of the scale that we've been able to accomplish with New T Mobile As Neville and team have been able to successfully go out and create procurement arrangements with some of the largest OEMs and we are building In terms of a network build than anybody has in this country before and that pace is what we're doing to build $11,700,000,000 to $12,000,000,000 in Ex annually, so you can think about as this massive network build completes, then it's rational that you would have a lower step down in CapEx. And the beauty is that those procurement synergies that we've been able to deliver on with the scale are what drive not only today the ability to build this network at such a We're at such a rapid pace with the CapEx that we're actually doing, which is significantly less than our competition, but also then allows that step down.
Great. Thanks.
All
right. Let's wrap up our final question with our host today. Thank you again for having us. Tim, go ahead with your questions.
Yes. Hey, folks. How are you doing?
I hope
you're Great. Great. You see us all?
Yes. I'm sorry we missed you. I wish we were in bonds.
Great to see you.
Look, First, what I want to say is, guys, we got everything recorded what you said. You sounded very bullish. Peter, I got your payback Starting 2022, so here we go. Everything is recorded. So let's thank you.
Guys, we want to say thank you for outstanding performance and the great partnership with you guys over the last years. Thank you for your great friendship and what you delivered, including the pandemic management. That was outstanding in the €10,000,000 campaigns. There's one thing what I want to say. Guys, you have to work on your outfit.
Now the Germans looking cooler than you guys, we are differentiating. Mike, you have to work on the differentiation. You know that.
Tim. That's fantastic. I guess cool is in the eye of the beholder.
But we are definitely cooler than you guys. Keep on running, guys. It's great working with you. And it's fantastic, the results. And good Luck with the upcoming months.
We'll see you soon.
Well, it's great to see you guys today. Thanks for having us and great day. Great first day to Capital Markets.
Hope to see you again soon.
Bye bye. See you, guys.
Thank you.
Mike.
Okay. So thank you, everyone, for bearing with us. And I think I hope you had a good first half of our Capital Markets Day, 2021 Capital Markets Day. So in terms of organization, tomorrow, we start again. We start at 11 in the morning.
The presentations for tomorrow, That's CET. The presentations will be available from 7 a. M. CET, so 6 GMT. And Claudia, tomorrow, will take us Claudia and Niemal will take us into the engine room, or I would call it maybe the cloud rather.
And in any case, it's stuff for the dreams, and here we go. So look forward to welcoming you back tomorrow. Thank you very much.